AMR Corp., the parent company of American Airlines, said on Thursday that it raised capital and is adding new routes to its four U.S. hubs to better compete in a changing travel marketplace.
The world’s second largest airline raised $2.9 billion, including $1 billion from Citigroup Inc. in an advanced purchase of frequent flier miles, and another $1.6 billion in aircraft financing from GE Capital Aviation Services, a subsidiary of General Electric. GE also gave American a $280 million loan.
The capital injection gives American a bigger cash cushion ahead of winter 2009, projected to experience higher fuel costs and light travel. Business travel, traditionally the most profitable revenue stream for airlines, has suffered during the global recession.
Such new funds will help American “face today's industry challenges and allow us to remain focused on the future and on returning to profitability,” said Gerard Arpey, AMR's chairman and CEO, in a statement.
AMR’s shares gained 19.73 percent in Thursday trading.
Hub Changes
American also announced flight changes at its biggest U.S. hubs—Chicago, New York, Los Angeles, Dallas-Ft. Worth, and Miami—to achieve greater flexibility and profitability.
“This strategy primarily aims to eliminate unprofitable flying and reallocate resources to hubs in Dallas/Fort Worth, Chicago, Miami and New York. These four cities, along with Los Angeles, serve as the cornerstones of the company's network,” AMR said in a statement.
The company will decrease the number of daily flights in and out of St. Louis and Raleigh/Durham, N.C. while increasing flights at its major hubs. AMR is still deciding how to relocate employees and how many employees may be affected.
In Chicago, American and its regional sister airline American Eagle will add 57 daily flights at O'Hare International Airport for a total of 487 daily departures. Its presence in New York’s John F. Kennedy International Airport will also increase by six new destinations.
Twenty-three flights will be added in Miami, the company’s biggest hub connection to South America and the Caribbean.
American also plans to add first class cabin space in some of its regional jets.
Alliance with JAL?
AMR is talking with Japan’s largest airline Japan Airlines (JAL) about a possible stake in the struggling Asian carrier.
JAL is Asia’s biggest airline and several airlines—including American, Delta Air Lines Inc. Korean Air, and Air France-KLM—are considering ties with JAL to expand the hugely profitable trans-Pacific flights.
JAL is awaiting restructuring approval from the newly formed Japanese government. The government has been considering various forms of financial aid and ruled out allowing the airline to collapse, sources told Kyodo News.
