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July 18, 2013

Q&A with AMR CEO Tom Horton about earnings

AMR chief executive Tom Horton spent a few minutes on the phone with the Star-Telegram this morning to discuss American's second quarter earnings.

Here's how Horton views American's success while restructuring under bankruptcy protection.

ST: AMR posted a solid $220 million profit in the second quarter, what do you attribute that to?

Horton: It was quite a good result. It’s really just the growing momentum of our restructuring savings and you’re seeing that accelerate as we’re getting closer to end of bankruptcy. At this point we’re at about 80 percent in all the work is done so the restructuring is effectively complete. There are some things where the savings will kick in later. For example, some of the supplier vendor savings will become effective when those contracts are approved by the plan of reorganization and that is yet to come. We are encouraged by the results…It wasn’t all on the cost side. We’re also seeing a lot of improvements on the revenue side in terms of network realignment and the alliances and all of the investments in new products and new airplanes. We had the highest passenger revenue for the second quarter in the company’s history.

ST: Yet second quarter total revenues were flat year-over year. Can you discuss the revenue trend?

Horton: It is obviously an uncertain time in the economy. You really have to deconstruct the second quarter to see with our unit revenues, and because we report monthly I can give you a little more detail on that. Early in the quarter as everybody knows there was a bit of softness on the revenue side, some of that having to do with the shift in the calendar for Easter and some of it had to do with sequestration… April PRASM was down 2.9 percent, May was down 1.8 percent and June was up 1.7 percent. We had a very strong June…partly a result of the revenue improvement and the acceleration of the restructuring benefits.

ST: Do you expect June’s unit revenue improvement to continue in the third quarter?

Horton: We’re encouraged by the fact that our advance book load factor is roughly in line with last year when we have another 2.7 percent capacity increase in the third quarter.

ST: Do you still expect the merger with US Airways to close in the third quarter?

Horton: We do. It is, of course, pending regulatory approval but everything seems to be falling in to place nicely and as we speak we are in discussions with the DOJ and the EU to make sure they have all of the information they need to have an informed view of the merger. 

ST: This will likely be the last time you are talking about quarterly earnings as you move into the chairman’s role after the merger. How do you feel about it?

Horton: I feel very positive. I think the new American is taking off and I think that’s evident of the results. I think it’s evident to our customers and our people. It’s evident to our owners who have fared very well…I feel good about that. I’m very passionate about American and its success and in my view success is the only option for this company and we’re now beginning to see it. There is no place for American but in the top of the industry in my view.

ST: Are there any other comments you would like to make about the second quarter earnings?

Horton: I think, as you know, this restructuring has been about restructuring but it’s also been about renewal of the company. We have taken a bunch more new airplanes. We’re accelerating the renewal of the company and I think that is something our customers are taking note of. In fact, next week I’m going to fly over to Hamburg and pick up our first new Airbus airplane, the A319, and that is a very exciting time for us. We will be receiving this year both the A319 and the new A321, that is our new transcon…That’s going to be an amazing airplane with fully lie flat seats in first and business. It has a one by one configuration in first class. It’s almost like a private jet…We’ll have door two boarding that is going to be very attractive to the media and financial and business markets that travel in first class.

-Andrea Ahles


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