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April 18, 2013

AMR CEO Horton talks about earnings and the computer outage

AMR chief executive Tom Horton took a few minutes to talk to the Star-Telegram on Thursday morning after the Fort Worth-based firm posted a $341 million loss for the first quarter.

Here is the Q&A.

ST: Labor costs dropped 16.7 percent for AMR in the quarter. Is this the first sign of the cost savings that AMR was able to achieve through the bankruptcy process?

Horton: It’s part of it. It’s an important part of it. In general, I think we’re off to a running start for the year. As you know the first quarter is easily the weakest of the year...We don’t yet have all of the savings ground into our numbers from the restructuring, you’ll see more coming online throughout the year. But I think we’re very much on track and I think it’s, in our view, a very quick and an effective restructuring of the company.

ST: Revenues improved 1 percent year over year for the quarter. What do you attribute the increase to?

Horton: That is a result of a lot of things, not least of all of the upgrades we’ve been making to the fleet, the product, the services and our customers are taking notice. The [Boeing] 777-300 in particular has been a big improvement.

ST: Can you give more details on what caused the computer outage that occurred on Tuesday?

Horton: I’m not going into a lot of detail because I’m probably not qualified to do that. We do understand the cause of the failure. We have ruled out external threats as some folks had asked about that given the events of the week. We’ve continued our evaluation and testing and believe the situation was an isolated event.

ST: So you're confident that this was an isolated issue?

Horton: It is and as you probably know we were very aggressive to reach out to our customers to help in any way we can. We were very quick in our response.

ST: What is the financial impact of Tuesday's computer outage?

Horton: We haven’t estimated it yet so stay tuned on that, but the operations are now back up and running normal as of yesterday. [Wednesday]

ST: Without $349 million reorganization fees and one-time charges, AMR would have posted a profit of $8 million. Is this the last quarter where AMR will have significant charges related to the bankruptcy process?

Horton: I really can’t pay lawyers enough. (laugh) But seriously, it will begin to wind down. You’ll see some more in the second quarter before we’re completely through the bankruptcy process.

ST: What kind of travel demand is American seeing as several carriers reported weak demand in March partly due to the federal budget cuts?

Horton: We saw a little bit of softness at the tail end of the quarter. We’ve seen a little bit for April. However, May and June bookings are slightly ahead of last year. We’re going to have to wait and see. The industry dynamics are reasonably healthy and we’ve got GDP growth in a couple percent, which is not as fast as we think it should be but industry capacity is relatively constrained.

ST: Is the merger with US Airways still scheduled to close later this year?

Horton: I think it’s on track. We’ve said we expect to close the deal in the third quarter. We still believe that will be the case. The plan confirmation hearing is now set for August 15. We’re very busy working together on the integration planning and [US Airways CEO] Doug Parker and I chair a transition committee and we’re meeting weekly and we're making good progress but there’s a lot of work ahead.

-Andrea Ahles

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