DALLAS (AP) — American Airlines boosted traffic in June, something its biggest competitors failed to do, yet American parent AMR Corp. is still expected to report a second-quarter loss on Wednesday.
WHAT TO WATCH FOR: Any progress on raising revenue from its new international ventures. Investors are also waiting to see if AMR finally sells or spins off its American Eagle subsidiary, which carries passengers from smaller cities to American Airlines hub airports.
Also, investors will be listening for any comments about demand past the peak summer vacation season. After raising prices a half-dozen times early this year, the airlines have been unable to boost fares since April, with the latest attempt appearing to fail on Monday.
That has raised questions about whether airlines raised prices too high in a weak economy and caused demand to tail off.
"Leisure travelers were surprised by how high fares had gotten in early June when they went to book their summer vacations," said Helane Becker, an analyst for Dahlman Rose & Co. "We heard from several people they made 'other plans' when they saw how expensive it was going to be to fly to their intended vacation destination."
AMR has lost $4.5 billion since 2008 and was the only large U.S. airline to lose money in 2010, a strong year for the industry.
CEO Gerard Arpey has come under scrutiny from analysts and investors who are impatient with a lack of dramatic moves to turn around American, which was the world's biggest airline just three years ago but has since slipped to third.
Arpey is betting on more revenue from international partnerships with British Airways and Japan Airlines. In the sluggish U.S. travel market, he has focused most flights on five large hub airports while scaling back at smaller cities.
In June, traffic on American and Eagle grew 2.3 percent compared with June 2010. That's modest compared to gains of more than 7 percent at low-cost carriers Southwest and JetBlue, but it sparkled in comparison to losses at the two biggest airline companies, United Continental Holdings Inc. and Delta Air Lines Inc.
Arpey also aims to limit American's labor costs, which it claims are the highest in the U.S. airline industry. That has created a stalemate with labor unions in ongoing negotiations over new contracts.
WHY IT MATTERS: Even if American can hold the line on labor costs, which account for more than 30 percent of its budget, it faces other costly needs and challenges.
Jet fuel prices are higher than a year ago and have been volatile. And American wants to upgrade its fleet of more than 600 airplanes with newer, more fuel-efficient models that won't come cheap.
WHAT'S EXPECTED: Analysts think that AMR lost more than $230 million in the second quarter. Excluding one-time items, they're looking for a loss of 72 cents per share on revenue of $6.17 billion, according to a survey by FactSet.
Among the nation's seven largest airlines, the analysts expect only AMR to lose money in the second quarter and for all of 2011.
LAST YEAR'S QUARTER: In last year's second quarter, AMR reported a loss of $10.7 million, or 3 cents per share, on revenue of $5.67 billion.
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