Reducing tax stress

AMR Corporation chairman and CEO Gerard Arpey has indicated that as an industry, airlines have not “really done a very good job of educating public policymakers”.

“I did a calculation the other day...I was just looking at the number of customers we carried in the second quarter, and looking at our loss, and my back of the envelope calculation was we needed about $17 more per one-way customer to break even in the quarter, and that doesn’t seem like a gigantic hurdle to get over, but when you step back and then recognise how much taxes and fees are placed on our tickets before we get any revenue, you see why that is more of a mountain than it would otherwise appear to be despite the economic climate, despite all the other things going on,” said Arpey. 

He shared this during the AMR Corp. Q2 2009 Earnings Call, (transcript posted on Seeking Alpha). 

Arpey added, “We’ve not done as good a job as we should have. I think most of our efforts are on trying to convince the government to not do anymore harm in this environment because I believe the President’s budget has a couple of increases to the security tax and maybe one of the other taxes as I recall, and that’s obviously not something that would be wise at this time for this industry.”

On the same, CFO Thomas Horton said, “This is probably the most heavily taxed industry on the planet. Just to put that in perspective, if you look at what this company pays in taxes including excise taxes on tickets and fuel and ticket taxes and all of that, $3.5 billion in 2008. Put that in perspective against our revenues, it is extraordinary.”

Arpey further added, “That’s just American. That’s American’s annual taxes and fees. Our market cap here right now it’s about $1.2 to 1.3 billion, so we’re doing a pretty good job of feeding the government right now.”

The company reported a $390 million second-quarter loss as collapsing travel demand continued to erase gains from lower fuel costs. It said second-quarter revenue fell 21 percent to $4.89 billion from a year earlier.