American Airlines' parent AMR incurred a massive $2.1 billion net loss for 2008 compared to the $504 million profit it recorded in 2007, as soaring fuel prices slashed deep into the US major's bottom line.
Faced with economic uncertainty and "fuel price volatility", the company says further capacity reductions are planned in 2009.
Revenue for the 12 months ended 31 December 2008 rose 3.6% to about $24 billion as AMR implemented broad capacity cuts.
However, this revenue increase failed to compensate for a 16.8% rise in expenses to nearly $26 billion, of which fuel accounted for over $9 billion.
AMR's operating loss for the year plummeted to $1.9 billion versus an operating income of $965 in 2007.
In addition to fourth quarter charges totalling $126 million, the full-year results include a $432 million gain from the sale of American Beacon Advisors facility, severance and aircraft grounding charges of about $91 million, as well as non-cash aircraft and route impairment charges of approximately $1.1 billion related to the company's capacity reductions in late 2008.
For the fourth quarter, AMR recorded a net loss of $340 million on revenue of $5.5 billion. This compares to a fourth quarter 2007 net loss of $69 million on revenue of $5.7 billion.
The firm posted a fourth quarter operating loss of $196 million versus a loss of $69 million in the year-earlier quarter.
"Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," says AMR Chairman and CEO Gerard Arpey.
"We believe these actions and our fleet renewal efforts have put us on sounder footing as we face continued economic uncertainty, slower travel demand, and fuel price volatility in 2009. We intend to continue managing our business - from capacity and fleet planning to balance sheet repair, fuel hedging and revenue initiatives - conservatively and with discipline."
To this end, AMR is implementing further capacity cuts in 2009. The company expects its full-year mainline capacity to decrease by more than 6.5% over 2008, with a reduction of domestic capacity of approximately 9% and a reduction of international capacity of more than 2.5% compared to 2008 levels.
On a consolidated basis, AMR predicts full-year capacity to decrease by nearly 7% in 2009 compared to 2008.
For the first quarter, mainline capacity will drop by more than 8.5% year-over-year, with domestic capacity expected to decline by more than 11.5% and international capacity expected to decline by nearly 4% compared to first quarter 2008 levels.
AMR anticipates that consolidated capacity in the first quarter of 2009 will decrease by more than 8.5% compared to the first quarter of 2008.
Regional affiliate capacity, meanwhile, will decline by about 9.5% in the first quarter compared to the prior-year period and full-year regional affiliate capacity will decrease by more than 8% in 2009 compared to 2008 levels.