American Airlines says it will return 30 jets to Boeing

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Posted 7:46AM on Friday, January 18, 2002

FORT WORTH, Texas - American Airlines' parent company says it will return as many as 30 Boeing 717s that had been part of the TWA fleet. AMR Corp. bought Trans World Airlines last year and is folding it into American. Shares of AMR Corp. slipped more than 4 percent Thursday after an influential analyst downgraded the company's stock. Goldman Sachs analyst Glenn Engel lowered the stock of Fort Worth-based AMR from "buy" to neutral, saying it will take longer than expected for American to return to profitability. Shares of AMR fell $1.16 to $24.86. AMR said Wednesday that it lost $798 million in the fourth quarter, but that loss was narrower than analysts had expected. Other airlines also saw their stock slide. Shares of Houston-based Continental, which reported Thursday that it lost $149 million in the fourth quarter, fell $2.65, or 8.5 percent, to $28.45. Continental and American are battling a recession and a travel downturn that worsened after the Sept. 11 terrorist attacks. Most major carriers cut about 20 percent of their flights and have grounded dozens of aircraft. Seventeen of the TWA jets already have been idled, and AMR Chief Financial Officer Thomas Horton said this week that the remaining 13 would also be mothballed. Peter Conte, a spokesman for Boeing Commercial Airplanes, said the announcement did not come as a surprise, because the companies had been discussing it for months. "This is a business decision that American has made, and it is not a reflection of the 717 airplane," Conte said. "We feel confident that we will be able to place any of the available aircraft or airplanes with existing and new customers." Conte had no firm estimate when the returned 717s could be placed in new homes but said it could happen as early as spring or summer. Boeing had considered scrapping the 717, but in December the company's board of directors decided simply to scale back production of the money-losing 100-passenger plane. American does not fly the 717, and AMR executives have said it didn't make sense to keep the TWA 717s when American uses 74 of the similarly sized Fokker 100s. Flying many different types of aircraft can increase a carrier's maintenance and operation costs. Engel, the Goldman Sachs analyst, said he now expects AMR to lose $3.80 per share this year instead of his earlier forecast of a $1.85 per share loss. He projected the company would earn $1 per share next year instead of his previous $2 per share estimate. "It will take them longer to get back in the black," Engel said, adding that some passengers will avoid American because it lost two planes in the Sept. 11 attacks, lost another in a fatal crash in November and had a terrorist with a bomb in his sneaker removed from a Paris-to-Miami flight last month. Also, he said, American is more dependent than some rivals on corporate travel, which is in a slump; has taken on new fixed costs with the acquisition of TWA; and faces increasing labor costs. American is negotiating a new contract with its pilots. Horton, the chief financial officer, said Wednesday that the airline has budgeted higher costs for that contract, but he declined to say how much. Delta Air Lines announced Thursday it will accept only 13 new Boeing aircraft through the end of 2003 instead of the 52 it had planned as it continues to curtail spending since the Sept. 11 attacks. Delta also said it will stop flying its 50 Boeing 727s, an older, less-efficient model, by the end of next year instead of in 2005 as it originally planned. The Atlanta-based carrier will take eight 737-800s, 767-400s and 777s this year and five 737-800s next year from Boeing. Before the attacks, Delta had planned to acquire 24 new planes in 2002 and 28 in 2003.