AMR Posts Second-Quarter Profit as Average Fares Increase

American Airlines parent AMR Corp. posted second-quarter earnings of $95 million, excluding bankruptcy-related costs, as average fares rose.

Including $336 million in restructuring costs, the net loss for the three months ended June 30 was $241 million, or 72 cents a share, the Fort Worth, Texas-based airline said today in a statement. The year-earlier loss, before the carrier sought bankruptcy protection, was $286 million, or 85 cents.

“American had numerous problems on both the top line and the cost side, and it’s good to see both of those moving in the right direction,” said Fred Lowrance, an Avondale Partners LLC analyst who doesn’t rate the shares. “The results would say they are performing in line to slightly above average among the big carriers, at least in the second quarter.”

The results, including record sales of $6.45 billion, reflect the strength of American’s route network and revenue-sharing alliances with carriers outside the U.S., Chief Executive Officer Tom Horton said in a message to employees. Both are key components in American’s plan to emerge from bankruptcy on a stand-alone basis.

The third-biggest U.S. airline sought Chapter 11 protection in November after three consecutive years of losses and sitting out a round of industry consolidation that created two larger competitors. It’s preparing now to evaluate mergers and other restructuring options with the unsecured creditors committee in its bankruptcy.

Restructuring Progress

Revenue rose 5.5 percent in the quarter, AMR said, buoyed by a 6.8 percent increase in average fare per mile. Spending for jet fuel, the airline’s biggest expense, climbed 0.3 percent to $2.21 billion.

“This type of financial performance and operating performance that is so strong is unusual for companies in restructuring,” Bella Goren, American’s chief financial officer, said in an interview today. “Our improvement reflects only a fraction of our restructuring progress, with a lot more still to come.”

AMR’s 6.25 percent bonds due in October 2014 rose 1.25 cents to 66.5 cents on the dollar today, according to Trace, the bond-pricing reporting system of the Financial Industry Regulatory Authority.

American is the first major U.S. airline to release second-quarter results. The nine largest carriers, excluding American, should report combined earnings of $2.1 billion, up 62 percent from $1.3 billion a year earlier, Ray Neidl, a Maxim Group LLC analyst, said in a note yesterday.

Oil Prices

Results will be helped by declining oil prices and continued unit-revenue growth, he said.

AMR ended the quarter with $5.8 billion in cash and short-term investments, including $772 million restricted for specific uses. That compared with $5.6 billion, including $457 million in restricted cash, at the end of March.

“While there is still much to be done, we expect this momentum to build quickly as the new American re-emerges as an industry leader,” Horton said in the statement.

Passenger revenue for each seat flown a mile in American’s main jet operations rose 8.7 percent, aided by the higher fares and a 2.4 percent reduction in flight and seat capacity. Costs for each seat flown a mile, a measure of efficiency, rose 5 percent.

American reached an agreement in May with its creditors committee, which has a voice in major decisions during bankruptcy, to explore strategic options including a possible sale.

While US Airways Group Inc. has said it wants to merge with American, Horton said in a letter to employees last week that the carrier outlined its preliminary view of “multiple” options in a meeting with the committee.

US Airways, JetBlue Airways Corp., Alaska Airlines, Frontier Airlines and Virgin America Inc. were discussed, said a person familiar with the situation who asked not to be named because the talks were private.

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