AMR cuts labor costs, posts 4Q profit of $262M
- Article by: DAVID KOENIG
- Associated Press
- January 16, 2013 - 10:43 AM
DALLAS - American Airlines made a profit in the fourth quarter, a big turnaround from a year ago, as it slashed labor costs and reaped other benefits from its trip to bankruptcy court.
Parent company AMR Corp. said Wednesday that net income was $262 million compared with a loss of $1.1 billion in the fourth quarter of 2011.
Labor was AMR's second-biggest expense behind only fuel. The company chopped spending on wages and benefits by 13 percent as it eliminated thousands of jobs and reworked its union contracts to cut costs.
One-time gains such as an income tax benefit and the settlement of a business dispute also helped greatly. Without those, AMR would have lost $88 million.
Revenue ticked down to $5.94 billion from $5.96 billion a year earlier.
The quarter included disruptions from Superstorm Sandy and fallout from what the company called a pilot work slowdown. American ranked last among the 15 biggest U.S. airlines in on-time arrivals during November, according to government figures.
The fourth-quarter profit, even one earned with the benefit of one-time gains, comes as AMR continues to study whether it should merge with US Airways Group Inc. or exit bankruptcy on its own. CEO Thomas Horton has promised a decision within weeks.
American is the nation's third-biggest airline and US Airways ranks fifth in passenger traffic. Combined, however, they would be roughly the same size as world leader United Airlines and slightly bigger than Delta Air Lines.
"Irrespective of where we go with the merger question, the new American is going to be very strong," Horton said in an interview. "We now have a highly competitive cost structure, much greater operational flexibility." He said the company's financial results would improve even more quickly in 2013 starting with first-quarter numbers that it will report in April.
Horton declined to comment further about the potential merger.
AMR filed for bankruptcy protection in November 2011 after losing more than $10 billion over the previous decade. For all of 2012, it lost $1.9 billion, much of which was due to restructuring costs. Without those items, the company said its full-year loss would have been $130 million, a $932 million improvement over 2011.
This week, American announced changes to several aircraft orders, including speeding up delivery of its first Boeing 787 to November 2014.
The 787, which Boeing has billed as technologically innovative and fuel-efficient due to lighter composite materials, is under review by safety officials in the U.S. and Japan after several recent incidents. On Wednesday two major Japanese airlines announced that they will ground their new 787s. Horton still likes the plane.
"It's flying today," he said. "Boeing will sort through those issues along with the (airlines), and we think the 787 is going to be a great plane and we stand by it."
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