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AMR Nearing US Airways Merger Focuses Overseas With Longer Trips

American Airlines, close to completing its merger with US Airways Group Inc. (LCC), is boosting capacity by 2.7 percent this quarter as it adds flights in overseas markets including South Korea and South America.

For the year, the unit of AMR Corp. (AAMRQ) is boosting flying by 1.5 percent, most coming from the increases in long-haul flying in the three months ending September, Chief Executive Officer Tom Horton said today in a telephone interview.

“We’ve been growing capacity in some growth markets, South Korea, Mexico, Central America and South America, so we’re seeing a bit of that effect in the third quarter in particular,” Horton said. Overall capacity “we think is still pretty modest.”

Airlines have avoided adding capacity in recent years to maintain pricing power and keep planes full, especially in times of economic uncertainty or weakness in demand. Sluggish demand that weighed on results in April and May, when revenue for each seat flown a mile dipped 2.9 percent and 1.8 percent respectively, hasn’t continued, Horton said.

The benchmark gauge had “sequential improvement” during the second quarter, rising 1.7 percent in June, and so far bookings in July are “roughly in line with where they were last year” despite the added capacity, he said.

Photographer: Mike Fuentes/Bloomberg

An AMR Corp.'s American Airlines airplane, left, and a US Airways Group Inc. airplane sit parked at a gate at Dallas Fort Worth Airport in Fort Worth, Texas, on Feb. 14, 2013. Close

An AMR Corp.'s American Airlines airplane, left, and a US Airways Group Inc. airplane... Read More

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Photographer: Mike Fuentes/Bloomberg

An AMR Corp.'s American Airlines airplane, left, and a US Airways Group Inc. airplane sit parked at a gate at Dallas Fort Worth Airport in Fort Worth, Texas, on Feb. 14, 2013.

“We’re encouraged by that given that we’ve got this bit of capacity increase in the quarter,” Horton said.

Merger Reaffirmed

American reaffirmed today that the merger with US Airways will close this quarter, in conjunction with AMR’s exit from bankruptcy protection. Horton will become chairman of the combined company, while US Airways CEO Doug Parker retains that role.

AMR today also reported second-quarter profit of $357 million, excluding $137 million of reorganization costs and other expenses.

Including those items, net income totaled $220 million, or 59 cents a share, the Fort Worth, Texas-based carrier said today in a statement. The company posted a loss of $241 million, or 72 cents, in the same period a year earlier.

Revenue was little changed at $6.45 billion, as American kept 84.8 percent of seats filled on its main jet fleet. AMR’s fuel expenses slid 3.2 percent to $2.14 billion, while wages and salaries tumbled 18 percent to $1.45 billion.

AMR filed for Chapter 11 bankruptcy protection in November 2011 ahead of a fourth straight year of annual losses, listing $24.7 billion in assets and $29.6 billion in debt. The company’s plan of reorganization provides the potential for full recovery for AMR’s unsecured creditors, and a recovery of at least 3.5 percent for shareholders.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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