American Airlines parent AMR dropped $328 million in the first quarter, primarily due to rising fuel costs.
Well, fuel costs continue to go up, and CEO Gerald Arpey has said the airline could easily lose $100 million over the MD-80 groundings last week. Plus, American plans a slight cut in capacity, with a larger cut at American Eagle, this summer.
And, that’s not American’s only woe, though this one affects all airlines. The compensation airlines have to pay to bumped passengers has just been doubled, to $400 for an eventual delay of less than two hours and $800 for more than that. If AA is dropping capacity going into the start of summer vacation season, I can’t see how it’s going to avoid more payouts.
So, a $500 mil second-quarter loss for the AA coming up? Analysts say it will “only” lose $120 million in the second quarter, traditionally its most profitable, not counting the grounding losses, whatever they turn out to be.
But, I think that’s on the low side. We could still have an employees’ strike or slowdown if the AMR board passes out a bunch of executive bonuses. I would dump this stock.
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