Business briefs for January 16, 2002

Wednesday, Jan. 16, 2002 | 10:51 a.m.

WASHINGTON -- Consumer prices edged down by 0.2 percent in December, capping a year in which inflation was at its lowest since 1998, the government reported today.

The Labor Department's Consumer Price Index, a closely watched inflation gauge, rose by just 1.6 percent for all of 2001. That compared with a 3.4 percent jump in 2000, which largely reflected rocketing energy prices.

A dramatic drop in energy prices -- reflecting weak demand amid a worldwide economic slump -- was a key force behind the significantly lower inflation reading for 2001.

The 1.6 percent increase marked the best showing on inflation since 1998, when the CPI rose by the same amount.

In another report, industrial production at the nation's factories, mines and utilities declined by only 0.1 percent in December, after a steep 0.4 percent drop the month before, the Federal Reserve said.

The manufacturing sector has been hardest hit by the economic slump.

CEO works to lure back passengers

FORT WORTH, Texas -- AMR Corp. had a record quarterly loss of $798 million, or $5.17 a share, capping a year in which terrorist attacks, a fatal crash and a slump in business travel caused a 43 percent stock decline for the parent of American Airlines.

"I felt an enormous sense of relief, frankly, that 2001 was over," Chief Executive Officer Donald Carty told employees in a recorded message Jan. 3. "We'll accept the past, and begin to make the fresh start that we need and want for this airline."

The airline had four consecutive quarterly losses for the first time in nine years, and its loss totaled $1.8 billion, or $11.43 a share, for all of 2001. The results included $537 million AMR received under a U.S. government program providing $5 billion in cash aid for the industry after the Sept. 11 attacks.

Carty is beginning to win travelers back to the largest airline with fare sales of as much as 40 percent. American's traffic, or miles flown by paying passengers, fell 17 percent in December from the year-earlier period, compared with declines of 25 percent in November and 28 percent in October.

Excluding government aid of 19 cents a share in the most recent quarter, AMR's loss was $5.36, a larger loss than the average $5.08 estimate in a Thomson Financial/First Call analyst poll. AMR had net income of $47 million, or 29 cents a share, in the fourth quarter of 2000. Sales fell 22 percent to $3.8 billion.

Banks give firm time for takeover

RESTON, Va. -- XO Communications Inc., an unprofitable telecommunications company with more than $5.1 billion in debt, got more time from lenders to complete a takeover by Forstmann Little & Co. and Telefonos de Mexico SA.

A group of banks led by Toronto-Dominion Bank agreed to waive loan requirements such as revenue targets until April 15, XO spokesman Todd Wolfenbarger said. The agreement gives XO more time to negotiate with bondholders to reduce its debt to about $1 billion, a requirement for the completion of the buyout.

XO, based in Reston, Va., was hurt by soaring debt and falling demand after borrowing to build a high-speed data network. The company agreed in November to a takeover by Theodore Forstmann's leveraged-buyout firm and Telmex, Mexico's biggest phone company, that would wipe out the value of most XO shares.

Forstmann and Telmex plan to invest $400 million each for 78 percent of new XO shares. As part of the agreement, XO canceled interest and dividend payments on unsecured notes and preferred shares.

XO stock fell 2 cents to 10 cents in midday trading today. The shares traded at $24 a year ago and reached high of $66.25 in March 2000.

Bank giant promotes exec

NEW YORK -- Citigroup on Tuesday filled its long vacant job of president amid talk that its chief executive, Sanford I. Weill, is preparing to go on the acquisition trail yet again.

Robert B. Willumstad, who has overseen the company's vast and highly profitable consumer business, becomes president, a position unfilled since the departure of James Dimon in November 1998. Analysts said Tuesday that the appointment appears to place Willumstad, 56, as the leading candidate to succeed Weill, 68, and reinforces the importance of the consumer operation, which accounts for half of Citigroup's profits.

"We think it's a great business," Weill said in an interview Tuesday.

Some bankers and investors expect Weill to make further acquisitions in consumer banking after Citigroup receives an estimated $5 billion later this year from the spinoff of its property and casualty insurance business. A likely target, these bankers and investors say, may be FleetBoston Financial, the Boston-based company that is confronting large losses from its banking business in Argentina.