By TERRY MAXON / The Dallas Morning News
tmaxon@dallasnews.com
AMR Corp., parent of American Airlines Inc., unveiled a sweeping list of initiatives Thursday as it announced it is raising or borrowing $2.9 billion, strengthening its hubs in Dallas and elsewhere, reducing service in St. Louis and Raleigh, Durham, N.C., and buying more regional jets.
As part of the money-raising, Citibank Inc. is buying $1 billion in frequent-flier miles in advance, to be used in 2012 through 2016.
"Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability," said AMR chairman and chief executive officer Gerard Arpey said.
American and American Eagle “are refocusing their collective network strategy by bolstering areas of strength to best meet the needs of customers,” AMR said in its announcement.
“This strategy primarily aims to eliminate unprofitable flying and reallocate resources to hubs in Dallas/Fort Worth, Chicago, Miami and New York,” it said. “These four cities, along with Los Angeles, serve as the cornerstones of the company's network.”
At Dallas/Fort Worth International Airport, American will add 17 flights and American Eagle will add two in 2010, giving the two carriers 780 departures. American will reinstate its flights to San Salvador, El Salvador.
The biggest gains will come at Chicago, where AMR will add 57 flights including a new route to Beijing deferred from 2009. Miami will add 23 flights. At New York Kennedy, American will launch international service to Madrid, Spain; Manchester, England; and San Jose, Costa Rica.
At the same time, St. Louis – a sizeable hub when American bought Trans World Airlines Inc. assets in 2001 – will lose 46 American and regional flights and end service to 20 cities. AMR said after the cutbacks, St. Louis will have only 36 flights to nine destinations.
Raleigh-Durham, N.C., will keep 44 flights to eight cities, but will lose nine flights and three destinations in the cutback.
After the changes, AMR said 2010 flying capacity will be flat compared to 2009 on domestic routes and up 2.5 percent on international routes. American and American Eagle have both cut their capacity substantially this year.
The new financing should allay Wall Street worries that AMR, with only $2.8 billion on cash on June 30, might not have enough liquidity to weather the industry’s prolonged downturn.
Although fears have recently decreased as business has begun to pick up, analysts had raised concerns that some airline companies including AMR might run low on cash this winter.
The biggest source of new money is coming from Citibank Inc., American’s partner with AAdvantage-branded credit cards. The company raised $1 billion in cash from an advance sale of frequent-flier miles to Citi.
AMR said it also secured $280 in cash from a loan from GE Capital Aviation Service (GECAS), with aircraft as collateral.
It also raised $1.6 billion in commitments from GECAS through the sale and leaseback of Boeing 737 airplanes American has ordered. In return, American has agreed to buy GE engines for its Boeing 787s due to begin arriving in four years.
AMR said that American Eagle will put a first-class section into its Bombardier CRJ-700 jets, which currently have 70 seats in a one-class cabin. Eagle also plans to buy another 22 of the jets, to be delivered beginning in mid-2010. Most of those airplanes fly out of Chicago.
tmaxon@dallasnews.com
AMR Corp., parent of American Airlines Inc., unveiled a sweeping list of initiatives Thursday as it announced it is raising or borrowing $2.9 billion, strengthening its hubs in Dallas and elsewhere, reducing service in St. Louis and Raleigh, Durham, N.C., and buying more regional jets.
As part of the money-raising, Citibank Inc. is buying $1 billion in frequent-flier miles in advance, to be used in 2012 through 2016.
"Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability," said AMR chairman and chief executive officer Gerard Arpey said.
American and American Eagle “are refocusing their collective network strategy by bolstering areas of strength to best meet the needs of customers,” AMR said in its announcement.
“This strategy primarily aims to eliminate unprofitable flying and reallocate resources to hubs in Dallas/Fort Worth, Chicago, Miami and New York,” it said. “These four cities, along with Los Angeles, serve as the cornerstones of the company's network.”
At Dallas/Fort Worth International Airport, American will add 17 flights and American Eagle will add two in 2010, giving the two carriers 780 departures. American will reinstate its flights to San Salvador, El Salvador.
The biggest gains will come at Chicago, where AMR will add 57 flights including a new route to Beijing deferred from 2009. Miami will add 23 flights. At New York Kennedy, American will launch international service to Madrid, Spain; Manchester, England; and San Jose, Costa Rica.
At the same time, St. Louis – a sizeable hub when American bought Trans World Airlines Inc. assets in 2001 – will lose 46 American and regional flights and end service to 20 cities. AMR said after the cutbacks, St. Louis will have only 36 flights to nine destinations.
Raleigh-Durham, N.C., will keep 44 flights to eight cities, but will lose nine flights and three destinations in the cutback.
After the changes, AMR said 2010 flying capacity will be flat compared to 2009 on domestic routes and up 2.5 percent on international routes. American and American Eagle have both cut their capacity substantially this year.
The new financing should allay Wall Street worries that AMR, with only $2.8 billion on cash on June 30, might not have enough liquidity to weather the industry’s prolonged downturn.
Although fears have recently decreased as business has begun to pick up, analysts had raised concerns that some airline companies including AMR might run low on cash this winter.
The biggest source of new money is coming from Citibank Inc., American’s partner with AAdvantage-branded credit cards. The company raised $1 billion in cash from an advance sale of frequent-flier miles to Citi.
AMR said it also secured $280 in cash from a loan from GE Capital Aviation Service (GECAS), with aircraft as collateral.
It also raised $1.6 billion in commitments from GECAS through the sale and leaseback of Boeing 737 airplanes American has ordered. In return, American has agreed to buy GE engines for its Boeing 787s due to begin arriving in four years.
AMR said that American Eagle will put a first-class section into its Bombardier CRJ-700 jets, which currently have 70 seats in a one-class cabin. Eagle also plans to buy another 22 of the jets, to be delivered beginning in mid-2010. Most of those airplanes fly out of Chicago.
