AMR Corporation (AAMRQ)

American Airlines CEO Arpey is failing to hold the reigns tightly on his company. All of Americans work groups are operating with out contracts, creating instability in the work force. Americans failure to resolve its labor contracts in a timely fashion is impacting their bottom line on a daily basis. Executive managers have lost site of their customers, product, and employees. AMR will not rise to the challenge.

oil will test 140 usd, consumers get scasred by usd retreat uand will travel a lot less

Try finding out how much it costs to upgrade from economy to business on the codeshare PHXLHR service - you can't, it's premium economy. How much does a bag cost? Go to Lima, 2 are free, vacation at home and spend sixty bucks. Chances are you book in advance it'll be cheaper next week, or they'll schedule change you to arrive earlier - or later. Snow in Chicago? That's why our flights from Austin to Miami are delayed, nothing to do with 50 empty seats. Ask at the gate? Well, they're under so much pressure now they don't have time to keep up. If American didn't have the blue collar staff they have, the disintigration would be total. This recession ends, these guys will walk to somebody who will pay. Yes, American know why you fly, but long since stopped caring.

In 2007-2008, rising oil prices wrought havoc on AMR's profitability. Because of these increasing costs, American entered into hedging agreements for most of its fuel at prices well over $100 per barrel. However, after July 2008, oil prices have declined steadily, reaching less than $45 per barrel in January 2009.^[1] As a result, American was hurt by the flipside of rising oil prices - it lost money from overvalued hedging contracts. In Q3 2008 for example, AMR lost $360 million primarily because of the declining value of its hedging contracts as fuel prices plummeted. None of this bodes well for AMR as oil price volatility will probably remain throughout 2009.

American's fleet had an average age of 14.7 years in June 2008, making it one of the oldest fleets of the major airlines.^[1] Because of this, American will have to either pay higher maintenance costs for its aging planes or invest heavily in new aircraft. Additionally, AMR will have trouble finding buyers for its old airplanes in a struggling economy. As a result, the company will be at a competitive disadvantage and be unable to operate optimally until its fleet is a bit younger (which will cost a lot of money) - things are going to get worse before they get better for AMR.

AMR has $5.3 billion of debt maturing between 2009 and 2011 including $1.8 billion due during 2009 alone.^[1] Unfortunately for the company, it looks as though the credit markets during that period will be very tight and AMR will have a very tough time paying off its debt. This concern caused Fitch Ratings to cut its AMR debt ratings to "CCC," eight steps below investment grade.^[1]