News Column

American Airlines Revenue Rises as Merger Begins

January 28, 2014

Ely Portillo, The Charlotte Observer

american airlines
Earnings were up as the American Airlines, US Airways merger integration began (file photo)

Jan. 28--American Airlines said Tuesday that its profits and sales were up sharply for its fourth quarter 2013 -- not counting $2.4 billion worth of special charges related to its merger with US Airways.

Including those charges, American posted a $2 billion loss for the quarter and a $1.8 billion loss for the year. But the airline's executives said they weren't discouraged. They've been warning analysts that the merger-related charges would skew results.

Without those charges, the combined company would have posted a $436 million profit, up from a $42 million loss for the fourth quarter last year. That's better than analysts were predicting. The company had $10 billion worth of revenue in the fourth quarter, up 8.7 percent from the same quarter a year ago.

"This is (the) first time we are announcing earnings following our merger and because of this our results are more complicated than usual," said CEO Doug Parker in a message to employees Tuesday morning.

Though the companies have officially merged, American and US Airways still face years of work to combine the two carriers'computer systems, route maps, fleets of planes and employee groups.

"Our teams are working well together and our customers are already beginning to see the benefits of our combined network," Parker wrote. "We have much work ahead, but believe we are on our way to restoring American as the greatest airline in the world."

Charlotte is the combined airline's second-busiest hub, behind only Dallas/Fort Worth. Executives touted seasonal routes to four new European cities from Charlotte starting this summer as one of American's major achievements.

Airlines have posted strong profits so far this quarter, benefitting from strong end-of-the-year travel numbers and relatively stable fuel prices.

American also has plenty of cash in the bank: $10.3 billion at the end of the year.

American and US Airways agreed to merge last year, while American was in bankruptcy protection, but the federal government unexpectedly sued to block the deal. Regulators said the combination would dampen competition, raising fares and fees for travelers.

The Justice Department decided to let the merger proceed after American and US Airways agreed to give up some of their routes from Washington's Reagan National and New York's LaGuardia airports. The companies closed the $17.8 billion deal in December.

Parker, who led US Airways since engineering its 2005 merger with America West, took the top spot at the combined company.

On Monday, Parker told employees in a letter that his base salary had been set at $700,000 -- which he said was less than his counterparts at other major airlines -- and he can earn an annual bonus of up to $1.4 million. The company will have to make $2.5 billion in pre-tax profit for him to earn the full bonus.

American and US Airways have said they will proceed methodically with integrating the combined company. The airlines will keep their own names and continue to fly separately until they receive a single operating certificate from the federal government. That could take up to two years.

But some work on combining their operations has already begun. US Airways and American launched a codeshare agreement, allowing travelers to book flights and use frequent flier miles on both airlines, earlier this month. Last week, US Airways announced it will close its 600-employee operations center in Pittsburgh, moving those jobs to the company's larger American operations center in Dallas-Fort Worth.

On Monday, the company announced it had selected American's reseration system to use at the combined company. The reservation system is one of an airline's most important computer systems, tracking passenger and flight information. Actually combining the systems will take up to two years.

American's stock was up about 1 percent in pre-market trading, at $30.18 a share.

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(c)2014 The Charlotte Observer (Charlotte, N.C.)

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Original headline: American Airlines revenue up as merger integration begins


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Source: (c)2014 The Charlotte Observer (Charlotte, N.C.)


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