By Susan Carey and Ben Fox Rubin
The Wall Street Journal
Updated Oct. 17, 2013 11:31 a.m. ET
American Airlines parent
AMR Corp. swung to a third-quarter profit on record revenue and cost
savings achieved in its bankruptcy restructuring, and doesn't see much
effect on travel demand due to the government shutdown that just ended.
AMR Chief Executive Tom
Horton said in an interview Thursday that bookings in the current
quarter "appear to be quite strong," compared with the level achieved at
this time a year ago. "Demand for travel is outpacing our capacity
increases, which is good news."
While he said the
nation's third-largest airline by traffic continues to keep an eye on
the effects of the government shutdown, oil prices "have been fairly
tame" and the industry "has been disciplined with respect to the supply
and demand balance." This is leading to a fourth-quarter outlook about
which "we feel pretty good," Mr. Horton said.
The Fort Worth, Texas,
company posted net income of $289 million, compared with a year-ago net
loss of $238 million. But if $241 million in special items related to
its bankruptcy reorganization, financings and expenses related to its
pending merger with US Airways Group Inc. are stripped out, the latest
quarterly profit would have been $530 million, a company record. A year
ago, AMR reported a profit of $110 million, excluding $348 million for
such items.
AMR, which hopes to leave
its nearly two-year stay in bankruptcy-court protection via a merger
with US Airways, first must prevail in an antitrust trial slated to
begin on Nov. 25. The Justice Department in August sued the companies to
stop the combination, contending it would drive up ticket prices and
deprive consumers of choices in air travel. The airlines disagree,
saying the combination—which would form the largest U.S. airline by
traffic—would give fliers new choices and act as a counterweight against
United Continental Holdings Inc. and Delta Air Lines Inc., two carriers
that recently bulked up through mergers.
Several state attorneys
general joined the Justice Department in the complaint. Mr. Horton said
the airlines "are talking" to them in the hopes of changing their minds.
The Texas attorney general recently withdrew his opposition, something
Mr. Horton said was "the result of a lot of hard work."
More than 60 Democratic
members of Congress recently wrote President Barack Obama to show their
support for the combination. "I don't know what helps and what doesn't,"
the CEO said of that letter. "But there is overwhelming support for the
merger."
Until the trial is over,
AMR must remain in bankruptcy-court protection, which is costing it
about $50 million per quarter in professional fees. "It's a lot of
money, which is why we think it's important to get the company out of
restructuring as soon as possible," Mr. Horton said. Moreover, some
vendor and supplier contracts that were redone in the bankruptcy case to
reduce costs won't kick in until AMR leaves Chapter 11, he said. If AMR
and US Airways lose at trial, the larger carrier is expected to have to
craft a new plan or reorganization and poll its creditors on their
support before it can emerge.
AMR said it expects to
increase its fourth-quarter capacity by 3.5% year-over-year. Much of
that growth will come from flying its planes longer distances and by
adding new destinations in Latin America and Asia. For the full year,
capacity is expected to increase just 1.5% compared with all of 2012.
Revenue in the third
quarter was $6.83 billion, up 6.2% from a year ago and marking the
highest quarterly revenue figure in the company's history. Unit revenue,
a key metric of the amount of money taken in for each passenger flown a
mile, rose 3.4% in the quarter, compared with a year earlier, and
reached a company record. AMR said it filled 84% of its seats. The
quarter was the seventh consecutive three-month period in which the
company improved its pretax margins.
Consolidated unit costs, excluding fuel and special items, were down 5%, primarily driven by AMR's restructuring efforts.
AMR is the first U.S.
airline to report its third-quarter results. Other carriers will release
their numbers in the coming days and the general expectation is for
strong profits, based on robust unit revenue gains for most of them and
the fact that the third quarter seasonally is the strongest of the year.
Source: http://online.wsj.com
No comments:
Post a Comment