* Adjusted profit $1.38/share vs Street view $1.34
* Revenue rose, costs fell
* Merger partners open to settlement of U.S. suit, CEO says
Oct 17 American Airlines parent AMR Corp
reported higher-than-expected earnings on Thursday as
it cut costs and revenue reached a record for any quarter.
The U.S. carrier, which is looking to emerge from bankruptcy
by merging with US Airways Group Inc, has renegotiated
plane leases, cut management and frozen pension plans to lower
costs since filing for bankruptcy in November 2011. New labor
contracts with unions have also made it more cost-competitive.
Henry Harteveldt, a travel industry analyst with consulting
firm Hudson Crossing LLC, said the results, which represented
American's second consecutive quarterly profit, showed that
initiatives the carrier began since its Chapter 11 filing paid
off in the seasonally strong third quarter, which includes
summer vacation travel.
"Many of the moves American is taking in terms of refining
its network, adding flights for international travel were smart
business decisions," Harteveldt said.
Shares of AMR were up 8 percent to $5.56 in over-the-counter
trading on Thursday. Other U.S. airline stocks also gained.
BETTER RESULTS AHEAD
AMR Chief Executive Tom Horton said more revenue and profit
improvement was to come as the carrier upgrades its fleet with
new planes and expands service to higher-growth markets. For
example, a new flight from Dallas/Fort Worth to Hong Kong was
announced this week.
"There are more cost savings to be had," Horton said in an
interview. "A number of new contracts with suppliers and vendors
don't actually take effect until the day we exit restructuring."
Net income came to $289 million, or 76 cents a share, in the
third quarter, compared with a loss of $238 million, or 71 cents
a share, a year earlier.
Excluding restructuring costs and special items, profit was
$530 million, the most profitable quarter in company history,
Adjusted for restructuring costs and other items, profit
came to $1.38 a share. Analysts' average estimate was $1.34,
according to Thomson Reuters I/B/E/S.
Revenue rose 6 percent to $6.8 billion, the highest
quarterly total for that measure. Yield, a gauge of the average
fare paid per mile flown, rose 4 percent from the year earlier
to 16.36 cents a mile, also a record. Passenger revenue per
available seat mile, or unit revenue, rose 3.4 percent.
The revenue gain "indicates American is getting and keeping
business travelers and that it is also able to raise and manage
fares at the rate of inflation," Harteveldt said.
Operating costs fell about 4 percent, as expenses tied to
salaries fell 13 percent.
U.S. airlines have scaled back flying, pared money-losing
routes and gained new revenue sources with bag and seat fees to
restore profitability. Most U.S. carriers will report earnings
American was once the largest U.S. airline but now ranks
third behind United Continental Holdings and Delta Air
Lines, both of which used Chapter 11 to cut costs. For
years, American's higher cost structure put it at a
The U.S. Justice Department and several states sued to block
the proposed merger with US Airways in August, arguing the $11
billion deal would harm consumers by boosting airfares
. A federal trial in the case is set to begin
American and US Airways contend the combination, which would
form the world's biggest carrier, is needed to compete with
United and Delta, which have already been allowed to merge.
Horton, who would be nonexecutive chairman of the merged
American, said the companies were open to "a reasonable and
common-sense settlement" of the U.S. lawsuit. He added that the
recent agreement reached with Texas under which that state
withdrew its merger opposition showed that "cooperation can