AMR at the top: American Airlines Profit Stunner

The world’s largest airline posted the US industry’s biggest financial turnaround yet. American Airlines’ corporate parent AMR Corp. said it earned a fourth-quarter profit and an annual net, in sharp and welcome contrast to losses in the 2005 quarter and full year. In fact, the results reflect the airline’s first fourth-quarter and full-year profits since the year 2000, back in the much better if not good old days of the pre-disaster era. The annual profit of $231 million represents a $1.1 billion improvement over the net loss of $857 million the airline incurred in 2005, while the fourth-quarter net of $17 million represents a $617 million improvement over the quarter of a year before; this quarter is usually a weak one for airlines as business travel drops off with the colder weather and leisure travel slumps off except for the holidays. But this quarter was American’s third profitable quarter in a row.


Talking to analysts and reporters from headquarters near the Dallas/Fort Worth airport, AMR president, chief executive, and president Gerard Arpey repeatedly stressed that employee cooperation and initiatives were key to the strong performance, and pointed out the positive gains of labour/management cooperation in its maintenance services unit. AMR Fourth Quarter Earnings Conference Call  And Arpey repeatedly stressed that AMR stepped as deeply as it did into black ink without the advantages of bankruptcy court protection, unlike some of its competitors. It was these very factors that led the judges in the Airline Business Strategy Awards to nominate and select Arpey and his team as winners in the Strategy Awards for 2006 in Executive Leadership (http://www.strategyawards.com/2006%20pdfs/AB-037-Aug06.pdf ).


All, however, is not coming up roses in the Texan winter: the immediate reaction of American’s pilots union, the Allied Pilots Association, was to express “outrage” that the strong results could end up as executive bonuses. Based on closing prices of AMR shares, performance bonuses to be paid in April could easily total about $218 million, said APA president Ralph Hunter. Because a “disproportionate share” of AMR bonuses would go to some 50 senior executives, Hunter said “it is insulting for senior managers to be receiving a windfall that may equal or exceed all of our airline’s earnings in 2006″. APA Outraged That Executive Bonuses Could Match or Exceed American Airlines’ 2006 Net Profit The union has been vocal recently, refusing to agree to a management request to change work rules to allow American to fly its proposed Dallas/Fort Worth to Beijing route non-stop. The Transportation Department rejected American’s China proposal after it amended its plan to make a stop at Chicago O’Hare on the Beijing route; American’s archrival United instead won the route rights with planned non-stops between Beijing and Washington Dulles. Arpey didn’t address any of labour’s “unfortunate rhetoric”, as he called it, but noted that American was recalling furloughed pilots at an increased rate.

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