American Airlines parent AMR Corp (AAMRQ.PK), which plans to merge with US Airways Group Inc LCC.N to form the world's biggest carrier, reported higher-than-expected adjusted quarterly earnings on Thursday, aided by cost-cutting from its bankruptcy restructuring.
The carrier's net loss narrowed from a year earlier in the first three months of the year. Excluding reorganization and special items, American recorded an $8 million profit, the first time it has had earnings on that basis for the seasonally weak first quarter since 2007.
"If you can be profitable in the worst quarter, you certainly can generate a lot of earnings and cash in the next couple of quarters," said Michael Derchin, an airline analyst with CRT Capital Group.
American, the third-largest U.S. carrier by traffic, has renegotiated plane leases, cut management and support staff and frozen pension plans to lower costs since filing for Chapter 11 protection in November 2011.
For years, American's higher cost base had put it at a disadvantage with peers such as Delta Air Lines (DAL.N) and United Continental Holdings (UAL.N) that earlier restructured in bankruptcy.
This week, American filed formal plans to exit bankruptcy, a necessary step to completing its proposed $11 billion merger with US Air. Pending approvals, the deal is expected to close in the third quarter.
"It will be one of the more profitable network carriers," Derchin said of the new American.
American said its operations have returned to normal following a computer outage on Tuesday that forced it to ground nearly 1,000 flights. A software issue that affected primary and backup network systems caused the problem, the company said.
Chief Executive Thomas Horton said American understands the cause of the outage, has ruled out external threats and continues to investigate the issue.
The outage "was unrelated to the merger" planned with US Air, Horton said in an interview. "It was a unique event and we do not expect that to recur."
AMR's first-quarter net loss was $341 million, or $1.02 a share, compared with a loss of $1.7 billion, or $4.95 a share, a year earlier.
Adjusted for items, American had a profit of 2 cents a share, compared with a loss of 9 cents a share expected by analysts, according to Thomson Reuters I/B/E/S.
The company recorded costs of $276 million tied to its reorganization, and charges and merger-related expenses of $28 million. It also took a charge of $45 million tied to a rise in workers' compensation claims in recent months.
Operating revenue rose 1 percent to $6.1 billion, aided by record average fares paid per mile. Passenger revenue per available seat mile, an important measure known as unit revenue, rose 2.6 percent for American and its regional affiliate American Eagle.
Operating expenses fell 1.3 percent, as costs tied to wages and salaries fell about 17 percent.
Shares of most airlines traded lower on Thursday as oil prices rose. AMR was down 3 percent at $3.85.
(Reporting by Karen Jacobs in Atlanta; Editing by Gerald E. McCormick, John Wallace and Andrew Hay)