A series of events took place in American Airlines, a subsidiary
of parent company,
AMR Corporation
(
AAMRQ
) in the last few days. Importantly, the company received federal
bankruptcy judge's approval for three union contracts, based on
which American Airlines was allowed to cancel its old labor
contracts and introduce new working terms and conditions.
The company, attempting to revive under bankruptcy protection,
filed in November 2011, will resort to action with stringent
measures including retirement benefits reduction, increase in
maximum working hours for pilots, termination of supplement
retirement plan, reduction in flight attendants and ground workers
staff, and closing of a maintenance hub in Texas. It is anticipated
that these actions would save roughly $1 billion annually for the
company.
Apart from cost reduction efforts, American Airlines is also
working towards increasing its revenue base without the need for
spending on flight additions. The company is relaxing
revenue-sharing terms with other airlines, especially to boost
outsourcing.
Recently, a four year deal was signed with SkyWest Inc, who will
take over flights being operated in Los Angeles and Dallas by
American Eagle. SkyWest will fly as many as 23 50-seat Bombardier
jets for American Eagle.
Apart from this major announcement, AMR Corporation also came
out with its August 2012 Revenue and Traffic results recently.
Consolidated passenger revenue per available seat mile (PRASM) went
up 4.1% in the month compared with its prior-year period. Roughly
as many as 9.6 million passengers travelled/ boarded the planes in
August.
Consolidated traffic increased 0.1% year over year with domestic
traffic settling 0.7% below the prior year level and international
traffic moving up by 0.6%. Consolidated load factor went up 1.4
points to 85.8% with domestic load factor increasing 1.1 points to
87.2% while international load factor came in at 85.8%, up 1.7
points year over year.
The current Zacks Consensus Estimate for the third quarter of
2012 is 22 cents, representing a year-over-year growth of 145.8%.
Estimates for 2012 and 2013 are ($1.08) and 79 cents, reflecting
annual growth of 67.2% and 173.1%, respectively.
AMR Corporation currently bears a Zacks #3 Rank, implying a
short-term (1-3 months) Hold rating. Its prime competitor
Delta Air Lines Inc.
(
DAL
) has a Zacks #4 (Sell) rating and
United Continental Holdings, Inc.
(
UAL
) holds a Zacks #5 (Strong Sell) rating.
AMR CORP (AAMRQ): Free Stock Analysis Report
DELTA AIR LINES (DAL): Free Stock Analysis
Report
UNITED CONT HLD (UAL): Free Stock Analysis
Report
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