American Airlines' AMR bolsters cash position, shifts capacity to hubs

By
Dan Reed, USA TODAY
September 17, 2009, 9:23 PM ET
3 min read

— -- AMR/ (UPDATE 4):UPDATE 4-AMR bolsters cash position; shares soar

American Airlinesamr shored up its balance sheet Thursday with $2.9 billion of new financing to help it survive a strangling decline in travel.

The Fort Worth-based carrier also announced changes in the number of flights at many major hub airports in its network and in its fleet of planes.

The changes are designed to reposition American for brewing battles with Delta dal and other airlines that are vying for more business travelers who pay higher fares and who have been American's best customers.

Investors responded positively, bidding up shares of parent company AMR nearly 20% to $8.80.

In a series of financial deals, American announced it was:

•Selling $1 billion worth of future frequent-flier miles to Citibank, its credit card partner.

•Selling 84 Boeing 737s, 16 of which it already flies and more that it will receive over the next two years, to GE Capital Aviation Services for $1.6 billion. GECAS will lease those planes back to American.

•Borrowing another $280 million from GECAS, using other aircraft as collateral.

About $1.3 billion of the money will appear on the airline's third-quarter balance sheet, boosting its expected cash balance to around $3.7 billion. Tom Horton, executive vice president and CFO of AMR, said that by making those financial moves, "we have taken the liquidity question off the table."

Though not considered the most likely airline to run out of cash in months ahead, analysts generally had lumped American into the bottom trio of U.S. carriers — along with United uauaand US Airwayslcc— that were most vulnerable to a liquidity crunch.

American said it would add first-class sections to 25 of its Bombardier CRJ-700 regional jets flown by American Eagle, and order 22 more of the 70-seat jets with first-class sections.

The airline also announced it would increase flights at New York, Chicago, Dallas/Fort Worth, Miami and Los Angeles.

Chicago O'Hare will see the biggest gain: 57 more flights a day. American's O'Hare hub competes with United's larger hub there and with Southwest's luv large operation at Midway Airport.

In New York, where American historically has done well by catering to business travelers, it will add seven daily departures at JFK airport and two more flights a day at LaGuardia. Combined, American will have almost 200 daily departures from New York.

Delta, Continental, calJetBlue, jblu AirTran, aaiVirgin America and Southwest have large operations in New York or are expanding there.

"New York is the largest market in the U.S.," said Dan Garton, American's executive vice president of operations.

"To think that American Airlines will walk away from that kind of market because of increased competition is very unrealistic."

At Dallas/Fort Worth, American plans to add 19 flights a day for a total of 780. At Miami, American is adding 23 flights a day for total of 294. At Los Angeles International, it is adding two flights a day for a total of 129.