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AMR warns of lower profit
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March 17, 1999: 6:45 p.m. ET
Losses from pilot strike will tally at least $200M, American Airlines says
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NEW YORK (CNNfn) - The 10-day pilots' strike against American Airlines last month will cut first-quarter earnings to half what previously was anticipated, the parent company of the No. 2 carrier said Wednesday.
AMR Corp. (AMR) said it expects profit for the quarter to fall between 30 cents and 35 cents per share, excluding special charges. That's sharply lower than the 65 cents per share predicted by First Call Corp., which tracks corporate earnings.
"Our February financial results showed a greater loss of higher yield traffic than we had anticipated," said Gerard J. Arpey, AMR's senior vice president of planning and chief financial officer. "In addition to the losses associated with the canceled flights, customers were reluctant to book American for a period of time after the job action."
Pilots at the nation's second-largest carrier called in sick and refused to work overtime in a pay dispute more than a month ago. The sick-out caused hundreds of flight cancellations, stranding many passengers at airports on the eve of the Presidents Day holiday.
Arpey said AMR initially forecast that losses caused by the sickout could easily surpass $150 million. He said the company now predicts the cost will be much higher -- $200 million to $225 million in pre-tax earnings during the quarter.
"AMR's accounting needs to be improved if they suddenly found another $75 million in losses," said Stephen Klein, an airline analyst at S&P Equity. "I wouldn't think people would sell on this, but you never know."
Fort Worth, Texas-based AMR also announced that its board of directors had sanctioned a buyback of up to $500 million of its common stock. This brings AMR's total repurchase offers to $2.6 billion since 1997.
"They threw in the stock buyback to balance out the bad news," Klein said. "People are just going to write off 1999 as a lost year for them and just focus on their year 2000 estimate."
AMR's warning comes just days after the parent company of rival United Airlines, UAL Corp. (UAL), said it expects to report earnings well above Wall Street expectations.
AMR closed at 59-3/8, up 1-7/8. In after-hours trading, the composite share price fell to 58.
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American Airlines
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