American Airlines Is Projecting a Second-Quarter Loss

CHICAGO — The parent of American Airlines signaled a coming blood bath in the airline industry Wednesday, saying it will probably lose money in the second quarter.

The projection by AMR Corp. came after a costly round of air fare cuts and an overall fare restructuring that have sparked a surge in travel but battered the industry.

The loss will weigh heavily on the industry, which lost more money in 1990 and 1991 than it has earned in its entire existence.

There had been some hopes that the industry might turn around this year, but the slow-moving economic recovery and the fare wars of the last two months put an end to that scenario.

“We’re heading for another industry loss this year that could rival last year’s $2 billion,” said Lee Howard of Airline Economics Inc. in Washington.

Before AMR’s announcement, Wall Street had expected the nation’s biggest carrier to post a profit of 7 cents a share in the quarter.

Now, Timothy Pettee, analyst at Alliance Capital, expects American to lose 20 cents a share in the second quarter and 50 cents in the third quarter.

“It certainly means a loss for the year,” he said. “American’s numbers for the last six quarters have been the best in the industry, except for Southwest. It must be really painful for the Continentals and the Northwests.”

AMR shares fell $1.125 to close at $62.625 on the New York Stock Exchange.

The AMR projection is “a harbinger for the whole industry--if you don’t make money in the second quarter, things are really bad,” Howard said.

American, which brought on the air fare wars with its simplified ticket plan on April 9, said the resulting fare cuts by other airlines have taken their toll.

American said it was trying to put some sense into the air fare structure, but what ensued was chaos.

“The second quarter has been difficult,” Dallas-based AMR said in a statement.

Rising fuel prices have also sapped earnings.