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American Airlines parent quarterly loss shrinks

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American Airlines parent AMR Corp. (AMR-N) posted a smaller-than-expected quarterly loss, but soaring fuel costs are prompting the carrier to curb capacity later this year.
   
AMR is the first major U.S. airline to report first-quarter earnings. The results sent its shares higher and underscored resilience in the industry to rising jet fuel costs, which have risen with the price of oil.
   
American, the third-largest U.S. airline, and its top rivals have managed the jet fuel rally with help from capacity reductions in recent years. AMR said it planned to trim fourth-quarter system capacity by 1 percent.
   
"High fuel prices remain one of the biggest challenges to our industry and our company," Chief Executive Officer Gerard Arpey said in a statement. "We believe our steps to aggressively increase revenues, reduce capacity, control nonfuel operating costs, and bolster liquidity will help us to better manage the challenges we currently face."
   
The fourth-quarter capacity reduction is in addition to AMR's previously disclosed plan to curb capacity by 1 percentage point for 2011.
   
PAINFUL FUEL BURDEN
   
The Air Transport Association said last week that U.S. airlines might set a record for fuel costs when they report results, paying about $3 billion US more so far this year.
   
The price of U.S. crude was up $1.06 at $109.32 Wednesday. It had started the year at $91.31.
   
Fuel costs for AMR increased 24.8 percent to $1.8 billion, the airline's highest cost in the first quarter. A year ago, labor was AMR's top cost.
   
AMR said its first-quarter net loss narrowed to $436 million, or $1.31 per share, from $505 million, or $1.52 per share, a year earlier.
   
Excluding $31 million in one-time noncash charges related to sale and lease-back transactions, the company lost $1.21 per share. Wall Street had expected a loss of $1.32, according to Thomson Reuters I/B/E/S.
   
Revenue increased 9.2 percent to $5.5 billion. AMR ended the quarter with about $6.3 billion in cash and short-term investments.
   
Morningstar equity analyst Basili Alukos praised a 1.8-percent cut in unit costs by AMR, but he noted struggles with fleet management and persistent labor disputes at the company.
   
"AMR still struggles with an inefficient fleet and an onerous workforce structure, two disadvantages that I don't see improving any time soon," Alukos said. "As such, I'd be hard pressed to see AMR return to profitability this year."
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