American Kicks Off Earnings Season

Last Updated Jul 16, 2009 10:08 AM EDT

It's earnings season, and if you're a fan of the airline industry, you'll probably want to pop some Prozac. Numbers are guaranteed to be really, really ugly. American kicked off the season yesterday with bad news, as expected.

That sound you hear is the crashing of passenger demand. I've talked about it here over the last few months as demand has continued to weaken, so this isn't a surprise. It's just painful to watch when you consider that this year's second quarter had both Easter and the beginning of the summer season.

American reported a net loss of $319 million in the quarter, excluding special items. That is just a bit worse than last year, but remember that fuel prices last year were far higher. In fact, American paid $3.19 a gallon in Q2 2008 and only $1.90 during Q2 this year. Costs went way down because of that, but so did revenue. Revenues were down a staggering $4.9 billion and unit revenues were down 16 percent.

Is there any good news? Well, American has over $3 billion in cash, and $3.7 billion of unencumbered assets that it can throw into the fire, if necessary, to raise more cash. So a relatively short term weakness in demand can probably be withstood by the airline. That's about as "good" as the news gets these days. Everyone is just holding on hoping for some improvement in demand.