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Transportation

American (AMR) Flights Back To 100%, What Was Cost?

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By Douglas A. McIntyre Published
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AMR (NYSE: AMR), parent of American Airlines, will return to 100% service tomorrow after FAA-mandated inspections of it MD-80 fleet forced the cancellations of over 3,000 flights.

AMR management has said that the incident will cost the carrier tens of millions of dollars.  An analyst with Standard & Poor’s estimated it could easily top $30 million," according to the AP.

The figure begs the question of how much the debacle will cost AMR. Customers may demand expense reimbursement for hotel stays and other costs which were incurred due to scrubbed flights. There may even be some class action suits for damages fliers will claim were caused by their lack of ability to travel.

Last year, AMR made only $945 million in operating income on $22.9 billion in revenue. The company had debt service of $894 million. It is likely that the rising cost of fuel and falling domestic traffic could take American to a loss in each of the next few quarters, and the expenses of the cancellations will make that worse.

At some point the carrier will have trouble meeting interest payments.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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