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AMR CEO sees turbulence
May 16, 2001: 3:54 p.m. ET

Chief of No. 1 airline sees weak demand, labor woes, merger questions ahead
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NEW YORK (CNNfn) - The head of AMR Corp., the world's largest airline holding company, sees a great deal of uncertainty ahead in demand for air travel, negotiations with its unions, the next round of planned purchases by the company and the improvement in flight delays and airport congestion.

Don Carty, CEO of AMR, which owns both American Airlines and Trans World Airlines, told shareholders Wednesday that he does not see any signs of an upturn in the weak travel market that plunged all but two major airlines into the red in the first quarter.

AMR lost $43 million, or 28 cents a diluted share, from operations in the first quarter, compared with a profit of $89 million, or 57 cents a share, reported a year earlier. Analysts surveyed by earnings tracker First Call are expecting it to return to profitability with earnings per share of $1.03 in the second quarter, but that forecast has been lowered from $1.37 a share since the company reported its first-quarter loss. The company earned $1.75 a share in the second quarter last year.

One of the two major airlines to post a first-quarter profit was discount carrier Southwest Airlines (LUV: up $0.63 to $17.95, Research, Estimates), which also held its annual meeting Wednesday. At that meeting Herb Kelleher, its CEO, said the company would be "solidly" profitable in the second quarter, as fuel costs are expected to fall from year-earlier levels.

Carty also said that the pilots strike at feeder airline Comair Inc., a unit of competitor Delta Air Lines, suggests that it is becoming more difficult to reach labor agreements in the airline industry.

Pilots have been on strike against Comair since March 26, shutting operations for the carrier, which was carrying 25,000 passengers a day before the strike.

Comair, a wholly-owned subsidiary of Delta (DAL: up $1.76 to $43.65, Research, Estimates), said Wednesday it will lay off another 400 of its non-striking employees, two days after it laid off half of its non-striking work force of 4,000 employees. The last day of work for non-striking employees affected by the latest layoff will be May 29.

It also said it is removing 20 more aircraft from its fleet, eliminating 200 additional pilots' positions. It had 1,350 pilots at the start of the strike.

Comair also cancelled all flights for at least the next 60 days, rather than the previous 30-day cancellation policy, assuring that the impact of the strike will be felt in the third quarter.

American is not facing an imminent strike, but it was hit by a pilots walk-out of its own in February 1999. It is in talks with its flight attendants union and faces upcoming talks with both pilots and mechanics.

"It is hard not to recognize how uncertain and unpredictable the relationship with labor has grown, not just for our company but for the industry. And it gets even more difficult to manage for both sides with every proposal that is negotiated in good faith by both parties, and then rejected by the membership," he said.

Carty said that management now is scheduled to meet with the leadership of the Association of Professional Flight Attendants May 21 through May 23. The membership of APFA rejected a previous tentative agreement, and membership has authorized a strike, although federal mediators have yet to find an impasse in talks, which they would have to do before releasing the union to strike.

Carty also said management will meet soon with the Allied Pilots Association, its pilots union.

He also said the chances for the purchase of US Airways Group Inc. by competitor United Airlines' parent UAL Corp. "is looking less certain every day."

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That deal directly impacts AMR, which as part of the deal would acquire or lease US Airways assets to allow it to share the Northeast shuttle service with United, as well as purchasing a 49 percent stake in DC Air, a new Washington, D.C., carrier being formed as part of the deal.

The UAL-US Airways deal is still awaiting regulatory approval. Carty said no matter the outcome of the decision, AMR is well positioned to respond.

Carty also decried what he termed the "pitiable state of the nation's air traffic control system," and warned "it will not be solved to anyone's satisfaction in the near future." graphic

Reuters contributed to this report


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AMR Corp.

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