Can AMR Possibly Be In Trouble With Better Traffic Metrics? (AMR)

AMR Corporation (NYSE: AMR) is a company we noted earlier this week which might have been the victim of overly aggressive reporting that turned into bankruptcy rumors.  It is rare that news reports become rumors, but that appears to have been the case.  Analysts have already partly debunked this and a corporate credit rating action recently pointed away from any serious bankruptcy fears as well.

What we want to know is whether or not a bankruptcy or another form of reorganization would actually make ANY sense when the airline’s traffic figures are healthy.  AMR has some serious fundamental issues that have to be fixed, but at least its internals appear to be good if you could somehow get the operations, labor, and perhaps the number of equipment models down in its fleet.  If labor fights back, there is a problem.  As a reminder, most airlines are getting rewarded these days for lowering overall capacity (and lowering headcount) rather than raising capacity. 

American Airlines has now reported that its September load factor was up 1.3 points at 81.4% percent from a year earlier, while traffic rose 1.9% on a capacity gain of 0.3% from a year earlier. Domestic traffic rose 1.7% year-over-year on 1.1% less capacity, resulting in an increase in domestic load factor of 2.3 points versus September of last year. International traffic increased by 2.2% YOY, as capacity increased by 2.4% with an international load factor 0.2 points lower YOY.  American boarded 6.8 million passengers in September.

If you go back to August, the report was as follows: American Airlines reported an August load factor of 85.3%, up 0.7 points YOY, while capacity fell 1.2%, with traffic down 0.4%.  The international traffic rose 3.0% YOY on a capacity increase of 1.1% with an increase in international load factor of 1.5 points YOY.  Domestic load factor increased 0.2 points YOY, as capacity and traffic fell 2.8% and 2.6% respectively. American boarded 7.6 million passengers in August.

Even the American Eagle regional flight showed gains, and the current preference is to spin the unit off.  The traffic trends were much the same except higher at 9.2% YOY in September as capacity rose 7.8%; load factor was 72.6%, up 0.9 points YOY; American Eagle boarded more than 1.6 million passengers in September.  If you apply the August data in total, American Eagle boarded more than 1.7 million passengers in August.

AMR closed up 2.5% at $2.45 on Wednesday, but shares broke under $2.00 on Monday when the word bankruptcy and reorganization were used in news reports that quickly migrated from news to rumors rather than the other way around.

JON C. OGG