AMR posts $289 million third-quarter profit

Posted Friday, Oct. 18, 2013  comments  Print Reprints

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For the second quarter in a row, AMR is in the black.

The Fort Worth-based parent of American Airlines said Thursday that cost-cutting implemented as part of its bankruptcy restructuring and increased revenue helped it post a $289 million third-quarter profit.

The airline said its revenue rose 6.2 percent to $6.8 billion, its highest quarterly figure ever. And its quarterly profit was a significant improvement from a $238 million loss in the third quarter of 2012.

“The demand for travel so far is even outpacing our capacity increases, which is good news,” AMR Chief Executive Tom Horton said during an interview with the Star-Telegram. The company’s improved earnings “are a result of all the things we’ve been doing here at American, but it’s also a pretty good revenue environment.”

AMR’s planned merger with US Airways is on hold as the airlines fight an antitrust lawsuit filed by the Justice Department to stop the deal. The trial is scheduled for Nov. 25 in federal court in Washington. The company continues to operate under Chapter 11 bankruptcy protection.

Although the results indicate that the company can perform well on its own, Horton said, they won’t hurt its case against the government.

“We think a strong company means a strong merger, and the standard for the DOJ is to prove that the merger is anti-competitive, not whether or not American or US Airways is making a profit,” Horton said.

He reiterated that the carrier is open to a “reasonable, common-sense” settlement of the antitrust case.

Jamie Baker, an analyst with JPMorgan, said the likelihood that the merger will be completed has increased to 60 percent from 50 percent, even though he does not expect a settlement before the trial.

“Our skepticism is driven by the view that satisfying the entirety of DOJ’s complaint would result in significantly diminished revenue synergies, to the point that costs would rise in a merger and little else,” Baker said in a research note sent to investors Wednesday evening. “But relenting labor pressure coupled with the Texas Attorney General (and possibly others?) dropping out certainly can’t hurt, in our view, and may ultimately cause DOJ to soften its position.”

The carrier set aside $59 million in the third quarter with the expectation of making its first profit-sharing payout to employees since 2001, Horton said.

The program was part of new union contracts negotiated during bankruptcy. If American continues to be profitable through the fourth quarter, the company would give employees their profit-sharing payments in March.

While in bankruptcy, American has cut its labor costs by 13 percent and trimmed its workforce by almost 7 percent, partly with early retirement offers.

Unit revenue, a key industry metric, grew 3.4 percent in the quarter. Jet fuel costs increased slightly, 1.8 percent, to $2.2 billion. The carrier paid an average of $3.04 per gallon of jet fuel, down 2.6 percent from the third quarter of 2012.

Excluding one-time accounting items and restructuring charges, the carrier said, its net profit was $530 million. The company reported $151 million in reorganization items, including professional consulting fees paid during the bankruptcy process.

AMR ended the quarter with a cash balance of $6.8 billion, not including a restricted cash balance of $935 million, up $2.5 billion since the third quarter of 2012. The company’s stock (ticker: AAMRQ), which trades on over-the-counter markets, rose 9 percent, or 48 cents, to $5.62.

The carrier estimates that its consolidated capacity will increase 3.5 percent in the fourth quarter, partly because of new international flights to South Korea, Mexico, and Central and South America.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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