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TheStreet Open House

American Air CEO: Our Costs Are Lowest, Our Alliance Is Stronger

DALLAS ( TheStreet) -- As it prepares to emerge from bankruptcy and merge with US Airways (LCC) , American Airlines (AAMRQ.PK) is enjoying gains that include not only the lowest costs among its key competitors but also an enhanced presence in Latin America, where it was already the principal U.S. carrier.

The March decision by TAM, Brazil's biggest carrier, to join Oneworldalliance, which also includes American, was "the biggest alliance news of the decade," American CEO Tom Horton said in an interview on Thursday. He said American's position in Latin America is going to become even stronger.

"We will have more growth in Latin America," Horton said. "I feel very bullish about that. We have the pre-eminent position and a very big win in alliance strategy. LATAM (including TAM) coming over is a real boost for Oneworld."

Meanwhile, American's first-quarter results, released Thursday, show consolidated cost per available seat mile excluding fuel and special items of 9.27 cents, lowest among the big three U.S. carriers. Factoring in guidance, Delta (DAL) is likely to have comparable first-quarter CASM of 9.82 cents while United (UAL) is likely to have CASM of 10.04 cents. US Airways, which provided only mainline guidance, is likely to be at 8.80 cents while American mainline CASM was 8.77 cents.

During the first quarter, American's mainline CASM fell by 1.7%, while consolidated CASM Fell 2.3%. Horton said most of the labor cost savings from bankruptcy contract is included in the decline, but "there's more to kick in" from new terms with suppliers that are yet to be approved, as well as additional flexibility in labor contracts including the ability to fly more large regional jets. "We took a whole lot of actions in 2013 and last year which are still manifesting themselves," he said.

American said Thursday that excluding items it earned $8 million in the first quarter, a period when airlines historically lose money.

Horton reiterated his belief, shared by others in the airline industry, that American's bankruptcy has been the industry's best because bondholders get full recoveries and shareholders retain value.

"This bankruptcy was built on renewal of the company rather than just restructuring or stripping down the company," he said. "The most compelling result, as a result of this restructuring and merger, was that bondholders fully recover and shareholders receive substantial values. These are unprecedented."

Asked how such recoveries benefit the airline going forward, Horton responded "We work for the owners."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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