American revives as IAG chief gives merger blessing
T
hings are looking up for American Airlines, the wholly owned subsidiary of AMR Corporation that become the largest carrier ever to file for bankruptcy protection when it entered Chapter 11 last November.
Chapter 11 is a provision in the US Bankruptcy Code that gives companies qualified protection from creditors while they attempt to trade themselves back to financial health.
In a very healthy result, AMR Corporation has reported second quarter revenue of USD6.5 billion, an increase of 5.5% year-over-year and the highest quarterly revenue in company history.
In the second quarter of 2012, AMR Corporation reported a net profit of USD95 million, excluding reorganisation and special items – a USD381 million improvement over the second quarter of 2011. AMR incurred a net loss of USD241 million compared to a net loss of USD286 million in the same period of 2011.
“Thanks to the great work of the entire American team, this was a time of exceptional improvement,” AMR’s chairman and chief executive, Tom Horton, commented.
“Our revenue performance has topped the industry for several months, leading to our first second quarter profit in five years excluding reorganisation and special items. And this improvement reflects only a fraction of our ongoing restructuring progress. 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.”
American Airlines, main partner of Qantas in North America, is tipped to merge with US Airways. Chapter 11 is often followed, in the US airline industry, by mergers and acquisitions. Carriers sometimes reorganise under Chapter 11 to emerge leaner, meaner and more competitive.
American faces a tough road ahead in battling the two even bigger US carriers, United and Delta Delta. Those two are profitable. To compete against them successfully, American needs to boost its route network and attract more high-yield traffic in the form of business flyers, analysts say.
US Airways chief executive Doug Parker has been quoted as saying that the best way for American to grow is by merging with US Airways.
And, in a tacit vote of approval, the chief of International Airlines Group (IAG), holding company for British Airways and Iberia, has said that a potential American Airways/US Airways merger would strengthen, not harm, the IAG airlines.
IAG supremo Willie Walsh told a meeting of aviation industry representatives in Washington he supported any consolidation plan that would strengthen its oneworld alliance partner American Airlines.
American is a founding member and mainstay of oneworld, which now groups 11 participating airlines, including Qantas.
Walsh told reporters after a speech hosted by the Washington International Aviation Club that IAG would invest directly in American when the US carrier emerged from Chapter 11 bankruptcy, whether it remained alone or merged with a partner.
Walsh told Reuters that a merger with another airline was inevitable for American. Although Walsh wouldn’t be drawn on whether US Airways and American would end up together, he did note that the US Airways network complemented the American network.
Written by : Peter Needham
