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American Airlines Parent Expects Over 50% Jump in Fuel Costs

June 18, 2008

By Terry Maxon, The Dallas Morning News

Jun. 18–AMR Corp., parent of American Airlines and American Eagle, said it expects to spend more than $10 billion for jet fuel in 2008, up nearly $3.5 billion from 2007.

In an investor filing with the Securities and Exchange Commission, AMR said it expects to spend $10.15 billion for fuel compared to $6.67 billion a year earlier.

That estimate has climbed nearly $900 million from AMR’s previous projection three months ago, even though it now expects to buy 115 million fewer gallons of jet fuel than it did in late March.

AMR chairman and chief executive Gerard Arpey was set to discuss the company’s plans on handling the soaring price of jet fuel when he speaks Wednesday to a Merrill Lynch transportation conference.

Mr. Arpey on May 21 outlined plans to slash American’s capacity after Labor Day. He estimated that the carrier will reduce its flying 11 to 12 percent in fourth quarter 2008 compared to the same period of 2007.

That reduction will result in thousands of furloughs and job cuts.

The entire industry is struggling to adjust to historically high prices for jet fuel. The Air Transport Association predicted Tuesday that the U.S. airline industry will see its jet fuel bill climb to $61 billion in 2008, up $20 billion from 2007.

For all of 2008, AMR estimated that American will fly 135.1 billion available seat miles, down 2.6 percent from its March estimate and a decline of 2.4 percent from 2007′s capacity.

AMR also warned that it will record non-cash accounting charges from its capacity reductions, including reduced values for airlines and other assets. It said it was unable to estimate the size or timing of the charges.

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