Should American Air Tout Record Profit as It Seeks a Merger?
The two carriers are trying to merge, making the case that consumers are entitled to a third global U.S. carrier that can compete with Delta (DAL - Get Report) and United (UAL - Get Report). They are also trying to show investors, employees and potential customers that they are operating successfully.
American reported on Monday that July was the best month in its history, with a net profit, excluding items primarily bankruptcy-related items, of $352 million. Including items, American earned $292 million.
"Today is a very good day," wrote CEO Tom Horton, in a letter to employees. "We are completing one of the most successful turnarounds in aviation history. We are building a strong, competitive and profitable new American poised to lead again."In his letter, Horton said the July profit was not only the best monthly profit in American's history, but also was nearly equal to the $357 million second-quarter profit, which was also a record. He said consolidated July revenue of $2.48 billion also set a monthly record. He also extolled American's expansion of its partnership with LATAM to Brazil and Colombia, the July delivery of its first Airbus A319 and the launch of service with the 76-seat Embraer E-175. Does that make it sound like American needs to merge in order to prosper? No doubt the Department of Justice doesn't think so. In its lawsuit challenging the proposed merger, DOJ alleged that "a revitalized American is fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for growth. "As recently as January 8, 2013, American's management presented plans to emerge from bankruptcy that would increase the destinations American serves in the United States and the frequency of its flights, and position American to compete independently as a profitable airline with aggressive plans for growth," the DOJ said. It seems reasonable to assume that when the court case begins, the letter Horton wrote Monday will become an exhibit in the DOJ's case. Following the eight paragraphs in which he lays out all the progress an independent, growing American has made, Horton includes two paragraphs voicing support for the merger. "Finally and most important, we are focused on completing our merger with US Airways," he wrote. "You probably saw last week's news that we are seeking a November trial date, and the American team is standing strong together with US Airways to get this merger closed."
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