AMR (AMR) Posts $325 Million Loss, Can It Stay Independent?

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AMR (NYSE: AMR) reported that it lost $325 million in the first quarter as fuel charges rose $665 million over the same period last year.

AMR also disclosed that it has reached a definitive agreement to sell American Beacon Advisors, Inc., its wholly owned asset-management subsidiary, to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, two leading private equity firms. AMR will receive total consideration of approximately $480 million.

AMR reported first quarter consolidated revenues of approximately $5.7 billion, an increase of 5.0 percent year over year. AMR ended the first quarter with $4.9 billion in cash and short-term investments, including a restricted balance of $426 million, compared to a balance of $5.9 billion in cash and short-term investments, including a restricted balance of $471 million, at the end of the first quarter of 2007. The year-over-year decrease in the Company’s cash and short-term investment balance is primarily related to AMR’s total debt payments of approximately $2.3 billion in 2007, including prepayment of approximately $1 billion.

AMR’s Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.2 billion at the end of the first quarter of 2008, compared to $17.5 billion at the end of the first quarter of 2007. AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $10.7 billion at the end of the first quarter of 2008, compared to $12.2 billion at the end of the first quarter of 2007.

The financial data still begs the question of whether AMR can stay in business as an independent company? The company had interest expenses of $194 million in the first quarter. If fuel costs continue to rise and the recession cuts revenue, it will be hard.

Douglas A. McIntyre