UPDATE 3-American Air parent AMR posts first Q2 profit in years
* Earned adj 92 cents a share in quarter vs estimate 80c
* Revenue flat at $6.45 bln
July 18 (Reuters) - American Airlines parent AMR Corp reported its first second-quarter profit since 2007 on Thursday, buoyed by bankruptcy cost-cutting that has put it on firmer financial ground ahead of a merger with US Airways Group.
The carrier, set to become the world's largest airline in the merger, earned $220 million in the quarter. American has renegotiated plane leases, cut management and frozen pension plans to lower costs since filing for bankruptcy in November 2011. Labor contracts reached with unions made it more competitive.
New planes, products and technology have also driven results, said Thomas Horton, AMR chief executive. Horton will be nonexecutive chairman of the Texas-based merged company, which will be named American Airlines Group, and the union is expected to be complete by the end of September.
"It really is starting to feel like a new company for our customers," Horton said in an interview.
American would reap further gains as new vendor and supplier contracts take effect and it brings in larger planes to better match aircraft size with demand on certain routes, he said.
The company was "evaluating the purchase of large regional jets," Horton said, declining to comment on recent reports that American was in talks with Brazil's Embraer, citing company policy not to comment on such deals.
Once the largest U.S. carrier, American Airlines is now third, behind United Continental Holdings Inc and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners. For years, American's higher cost base had put it at a disadvantage.
The merger with US Airways, which is still subject to various approvals, would be the mechanism by which American exits bankruptcy protection.
"American has the potential of being the most profitable airline in the world" after the merger, said Michael Derchin, an airline analyst with CRT Capital Group.
Second quarter net income of $220 million, or 59 cents a share, compared with a loss of $241 million, or 72 cents a share, a year earlier.
Adjusted for special items, per-share profit was 92 cents in the period, compared with 80 cents expected by analysts on average, according to Thomson Reuters I/B/E/S.
Revenue was flat at about $6.45 billion. Unit revenue, or passenger revenue per available seat mile, fell by 0.9 percent, after declines in April and May were partly offset by 1.7 percent improvement in June.
Operating expenses fell nearly 6 percent, with costs tied to wages and salaries down 18 percent.
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