Can This Airline Survive on Its Own?

Recently released September airline traffic data shows that AMR, parent company of American Airlines, continues to struggle. American had a terrible month, experiencing problems with seats coming loose on some flights, and experiencing more delayed and canceled flights with more pilots calling in sick. Not surprisingly, AMR's total traffic dropped 2.8% in September, with domestic traffic falling 7.1%. One bright spot for the struggling airline was a 4% uptick in passenger revenue per available seat mile, which rose due to more effective international joint ventures.

Still, this has been a terrible month or so for AMR, which is trying to exit bankruptcy as an independent airline. One of its biggest obstacles to doing that, the reluctance of its pilots' union to agree to a deal, is showing no signs of changing despite the fact that the two sides have resumed talks. In the video below, analyst Brendan Byrnes explains why he believes that the most likely outcome is AMR merging with US Airways, and why most long-term investors should stay away from legacy airline stocks. 

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Brendan Byrnes has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 10, 2012, at 8:47 PM, neamakri wrote:

    First I think AMR has all the resources it needs to become a good profitable airline. Second they need to completely revamp their business model; predatory money-losing practices.

    Here's what I mean. Suppose Southwest Airline decides to run a new route to Enid Oklahoma. They figure to carry a hundred passengers daily and make a profit. They schedule planes leaving at 8:00am. So, AMR scedules two predatory routes leaving at 7:50am and 8:10am. Now all three flights lose money; AMR more than Southwest. This story is fictional but mirrors what AMR does in reality.

    So the solution is simple. Just do what makes good profitable business sense.

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