AMR Bear's Rebuttal
by Rick Munarriz ([email protected])

Kudos to Chris for being able to keep a smile on even as this flight is falling. I hear he makes a mean Bloody Mary. While he makes a good case for the company, he isn't always entirely accurate. He writes that AMR's "growth may be slim for the next year or so." Growth? Earnings are projected to drop to $6.94 a share next year after a $7.73 a share showing this year. One analyst even thinks AMR will be lucky if it earns just five bucks a share in 1999. Sorry, Chris, I think you've got your ascent and descent mixed up. This isn't "slim" growth. This is the anti-growth -- a growth vacuum if you will.

My fellow Fool is fine with that. He almost seems happy that the company is retiring planes "given that 1999 is unlikely to see any major increases in airline traffic." Unfortunately, the other major carriers are adding to their capacity. The oversupply of seats for the industry is going to keep prices down. You and I will win. But the carriers, especially a dormant one like AMR, will lose.

Then again Chris thinks the Reno Air acquisition will vault American past United. This is a tiny entity. Like Hegeman pointed out to me, if AMR is set on being the anchor of this oneworld alliance with other international carriers, this half-hearted West Coast presence simply won't do. Yet, as insignificant as Reno is, AMR is still paying twice as much as the shares were fetching just two months ago. The company is looking to take on more debt, so odds are it will be overpaying for another regional player soon, too.

While I think AMR does offer some value in terms of its 80% stake in SABRE, the major carriers continue to reduce commission levels that are paid out to travel agents -- especially online ones.

In closing, I just don't see this stock getting locked back into its upright position. Do you really want to own AMR now? Will curiosity beckon you to wonder if next year's annual report will come with attached air sickness bags? Because even the analysts think the fundamentals are on a rocky descent. You deserve better. At the very least you deserve a growing company, not one with clipped wings.

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