Well today, American Airlines' holding company AMR announced its financial results for 2010's first quarter. Now while American made plenty of strides in the past year: such as keeping Japan Airlines in OneWorld, and getting ATI with British Airways, their financial results reveal some very disturbing figures.
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Let's start with the loss itself. It amounted to $505 million, but if we exclude a $53 million special charge related to the devaluation of Venezuela's currency, the actual loss was $462 million. A year previously, if we similarly negate special charges, American lost $362 million in the first quarter of 2009. Why is that so troubling? Well, 2009 represented absolute rock bottom for US airlines. It was what most people consider the lowest point of the recession, and airline traffic had fallen off a cliff. So how did American lose more money in 2010?
The answer lies in the 5.7% rise in costs that AMR reported. When your costs are rising, there's no way you can make a profit. But the issue is that American failed to keep its costs down. By comparison, Delta, who is almost twice as big, only saw a 1% rise in costs.
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And therein lies American's fundamental problem. As long as their cost structure remains exorbitant, nothing the airline can do will push them to a profit. And, the advances made in capacity cuts are useless if it doesn't help your bottom line. So those flight attendants who want to strike… If you don't do your part to keep costs down, you may not have a job in a couple years. Oh yeah, as I pointed out yesterday; American's flight attendants are the least cost-efficient in the US.
AMR's reports weren't all bad. Their cash position grew to $5 billion from $3.3 billion, a huge jump. And revenue grew by 4.7 %. But till the airline gets its costs under control, they won't get back to profitability.