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American Airlines July profit doubles to $292M
 

DAVID KOENIG, AP Airlines Writer


FORT WORTH, Texas (AP) — American Airlines posted a record one-month profit in July as it benefited from lower labor costs and higher revenue during the peak of the summer vacation season.

Parent AMR Corp. said Monday that net income more than doubled to $292 million, continuing the company's rebound since it filed for bankruptcy protection in November 2011.

"We are completing one of the most successful turnarounds in aviation history," CEO Tom Horton said in a letter to employees. "We are building a strong, competitive and profitable new American poised to lead again."

Horton said that excluding one-time restructuring costs, AMR would have earned $352 million last month — a company record. The CEO noted that the airline is adding new routes and getting the first of hundreds of new planes that it ordered.

American's momentum is convincing some in the travel industry that AMR doesn't need to merge with US Airways after all.

"If they're doing this well now in the throes of bankruptcy, I can only expect that they'll be able to compete alone and don't need this merger," said Brian Kelly, who blogs about travel as The Points Guy. Kelly believes the merger will lead to higher prices by reducing the nation's five biggest airlines to four.

That's the same argument that the U.S. Justice Department made when it filed a lawsuit this month to block the merger. A federal judge could decide Friday when that lawsuit will go to trial; in the meantime it's delaying the merger.

Others in the industry think that American's newfound prosperity could be fleeting and shouldn't be seen as reason to block the merger of the nation's No. 3 and No. 5 airlines. Bob Mann, an aviation consultant who once worked at AMR, questioned whether an independent American could increase revenue, hold down expenses and improve relations with labor unions, which support the merger.

Vicki Bryan, an analyst at bond-research firm Gimme Credit, said a stand-alone American would continue to struggle and could destabilize the rest of the industry.

"This merger is not about two fat cats coming together to get richer at the expense of consumers," Bryan wrote in a note to clients. "Restoring profits is important, yes, but this merger is also about jobs and flyer safety" and reliable service.

AMR's bankruptcy creditors pushed hard for the merger, which they saw as the best way to create an airline big enough to compete with United and Delta.

AMR has used the bankruptcy process to eliminate several thousand jobs and rewrite labor contracts. Its labor costs last month were 12 percent lower than in July 2012, accounting for about half the improvement in profit.

The company finally boosted revenue — up 7 percent from a year earlier. It was flat in the April-to-June quarter.

That helped AMR end July with $5.83 billion in unrestricted cash and short-term investments, an increase of $1 billion in one year.

 

 

 

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