AMR Profit Seen Leading Airlines in Doubling Net Income

American Airlines parent AMR Corp. posted third-quarter net income of $289 million today, leading off earnings reports for U.S. carriers whose profits may have doubled on stronger travel demand.

The Bloomberg U.S. Airlines Index rose to the highest level in almost six years after AMR’s results. Net income at the six biggest carriers will be $2.6 billion, according to Savanthi Syth, an analyst at Raymond James Financial Inc., after $1.12 billion a year earlier. She said planes stayed full into the usually slower month of September.

“It’s not going gangbusters, but it’s healthy, which is encouraging,” Syth said in an interview from St. Petersburg, Florida. “We’ll see what kind of impact the government shutdown has. Shorter term, the industry’s OK, but that could have an impact on demand going forward.”

AMR, stranded in bankruptcy amid a federal lawsuit to stop its merger with US Airways Group Inc., said sales rose 6.2 percent to $6.83 billion. Delta Air Lines Inc., United Continental Holdings Inc., US Airways, Southwest Airlines Co. and JetBlue Airways Corp. will announce results next week.

Closing the government “is not helpful” to the industry, said AMR Chief Executive Officer Tom Horton, who didn’t quantify the effect on the Fort Worth, Texas-based carrier.

New Bookings

Bookings this quarter are “quite strong compared to this time last year” and are up for business and leisure flying, Horton said in an interview. “That’s why we saw the revenue strength in the third quarter. A 6 percent increase in revenue is a pretty big deal in this industry.”

The company’s sales boost was the largest since the first quarter of 2012, according to data compiled by Bloomberg.

AMR climbed 9.3 percent to $5.62 at 4 p.m. in New York in over-the-counter trading. The airlines index gained 2.5 percent to its highest since October 2007.

“People are watching it,” Syth said of AMR. “It lends to how healthy the industry is. As investors focus longer term on this industry, you want all the leaders to be doing well.”

Quarterly profit of 76 cents a share, helped by flying more passengers at higher fares, compared with a net loss of $238 million, or 71 cents a share, a year earlier, AMR said in a statement. Profit excluding reorganization costs and special items rose to $530 million from $110 million a year earlier.

Demand, Capacity

American will boost seating capacity 3.5 percent this quarter, in part due to an increase in service to South Korea, Mexico and Central and South America. Capacity will rise 1.5 percent for the full year, according to the company.

“Demand for travel so far is outpacing our capacity increase, which is good,” Horton said.

AMR is approaching the end of its second full year in bankruptcy. It has received court approval for its plan to exit bankruptcy by merging with US Airways pending the resolution of a U.S. Justice Department antitrust lawsuit.

Regulators argue the combination would hurt consumers by boosting fares, while the airlines say the merged carrier, which would become the world’s biggest, would foster competition because United and Delta are both larger than American and US Airways on their own.

The U.S. industry returned to profit in 2010 after carriers cut capacity to better match demand, reducing costs and allowing airlines to boost fares as planes flew with more seats filled. Hunter Keay, a Wolfe Research Inc. analyst in New York, estimated that the six largest carriers would post a collective profit of $2.9 billion excluding one-time items.

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