AMR Corp. (AMR) executives on Wednesday charted a course they hope will restore profitability in 2011 to American Airlines after a three-year losing streak that took its loss for the decade to $11.7 billion.

The third-largest U.S. airline by traffic also pledged to keep costs flat this year as it tries to narrow a gap with rivals that will likely leave it the only network carrier nursing a fourth-quarter loss for 2010.

"We are optimistic about the trajectory we are on," Chairman and Chief Executive Gerard Arpey told analysts at the start of a crucial year for American Airlines.

While analysts are projecting a modest profit for 2011--the airline doesn't offer guidance--American's recovery hinges on leveraging expanded alliances with overseas partners, rejigging its domestic network and securing new deals with labor and third-party ticket sellers.

American provided little color on the contract disputes with intermediaries that have seen its flights dropped from Expedia Inc. (EXPE) and Orbitz Worldwide Inc. (OWW), the two largest U.S. online travel agents, and kept on its largest external seller--Sabre Holdings Corp.'s (TSG) Sabre Travel--only by a court injunction.

AMR Chief Financial Officer Bella Goren said first-quarter bookings are level with last year as passengers switch to AMR's own Web site and other online portals, but provided no revenue guidance.

AMR reported a fourth-quarter loss of $97 million, or 29 cents a share, compared with a prior-year deficit of $344 million, or $1.03 a share. This took the full-year loss to $471 million.

CEO Arpey said American's fuel bill this year would be $1 billion higher than last year at current oil prices.

American and rivals are pushing through fare increases and pledging to cut capacity as well as more costs if jet-fuel costs continue to rise, but the Dallas Fort Worth-based carrier also has to deliver on profitable growth from expanding its ties with British Airways PLC (BAIRY, BAY.LN) and Japan Airlines Corp. (JALSQ).

The AMR unit sees $500 million in annualized synergies from the partners and adjustments to its domestic network around five "cornerstone" hubs. It also wants to keep its market-leading presence in the Latin America market, where it benefits from a partnership with Chile's Lan Airlines SA (LFL, LAN.SN) within the Oneworld global alliance.

Lan and Tam SA (TAM, TAMM4.BR) on Wednesday reached a binding merger agreement, and AMR President Tom Horton said that, while American hoped to retain Lan, it remained to be seen whether the Brazilian carrier defected from Star, a rival alliance.

Arpey's optimism was reflected in a new order for two Boeing Co. (BA) 777-300ERs, which would become the largest aircraft in American's fleet and the first in almost a decade to be acquired for growth rather than replacement.

American has the largest aircraft-purchase program among the U.S. majors, with 35 Boeing 737s due to arrive over the next two years. Capital expenditure this year is seen around $1.6 billion compared with $2.25 billion in 2010.

AMR shares ended regular trading at $7.69, down 7.2%.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com
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