AMR Raises $2.6 Billion, and Its Shares Soar

AMR Corporation, the parent of American Airlines, said it had raised $2.9 billion in troubled credit markets and would shift to more profitable routes.

Investors viewed the improved cash position and outlook for growth positively, sending the company’s shares soaring nearly 20 percent to $8.80 on the New York Stock Exchange.

In a letter to employees, Gerard J. Arpey, AMR’s chief executive, said the company’s ability to raise money in troubled capital markets was a vote of confidence from lenders. But he expressed caution as the company tries to find its way out of the economic downturn.

“The fact is, we cannot borrow our way to prosperity,” Mr. Arpey said. “Moreover, the bar we must get over just got higher, since the additional debt we have taken on will mean higher interest expenses going forward.”

The $2.9 billion, which includes cash and financing, will help AMR meet some of its debt commitments. That includes $1 billion from the advance sale of frequent flier miles to Citigroup and a $280 million loan from GE Capital Aviation Services, secured by company-owned planes.

AMR also received $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation for Boeing planes AMR had ordered.

On Wednesday, United Airlines’ parent company, UAL Corporation, said it had liquidity initiatives planned for this year. AMR also said it would reallocate service to its hubs in Dallas/Fort Worth, Chicago, Miami and New York. Chicago will be most affected by the shift, where AMR said it would add 57 daily flights at O’Hare International Airport to the summer 2010 schedule compared with the winter routes. St. Louis will have the deepest service cuts, with 46 daily departures eliminated.

Airlines in the United States have been downsizing since last year, struggling to match supply with falling demand. AMR has trimmed its consolidated capacity — which includes its regional partners — by 11 percent for the 2009 schedule compared with 2007.
But as signs of stability in travel demand return, AMR expects a slight increase in its consolidated capacity next year. News Courtesy By The New York Times