Carrier defers deliveries and speeds aircraft retirements

American Airlines parent AMR has turned in its worst-ever third quarter loss of more than $500 million and deferred at least 29 new Boeing aircraft due for delivery next year.

American's $525 million loss ($414 million net loss) on revenues of $4.8 billion was exacerbated by the 11 September attacks - in which American lost two aircraft - but chief financial officer Tom Horton admits the company was heading for a "pretty sizeable" loss anyway, as the weakening economy hurt yields and the carrier absorbed costs of the acquisition and integration of TWA.

To slash capacity and capital expenditure, American has agreed with Boeing to defer at least 29 of 45 firm order Boeings to "beyond 2003". American does not specify what types will be delayed, but has more than 80 firm Boeings on order, including 737-800s, 757s, 767-300ERs and 777-200ERs.

American will continue to take all 20 Boeings still to be delivered this year - six 737s, eight 757s, three 777s and the remaining three 717s for TWA. Orders and deliveries regional jets for American Eagle - Embraer ERJ-140s and Bombardier CRJ700s - stay intact.

Retirements of 70 older aircraft, including 50 Boeing 727s, 10 Boeing MD-80/90s and 10 TWA McDonnell Douglas DC-9s, will be accelerated.

American is losing $10 million to $15 million a day compared to generating $4 million to $5 million a day before 11 September. Horton says the terrorist attacks alone have cost AMR up to $650 million. It is looking to slash another $2.5 billion from its 2001-2 capital expenditure on top of $1 billion cuts already planned.

Chopping costs as well as capacity will be crucial to all US airlines as most are embroiled in a fierce fares war. Southwest Airlines, which has the industry's lowest unit costs, admits even it cannot make money at the current prices of deeply discounted tickets.

Northwest Airlines, meanwhile, posted a third quarter net loss of $100 million on revenues of $2.3 billion. The airline says it would have been profitable if not for 11 September. It remains committed to new aircraft delivery schedules.

Source: Flight International