AMR Counters US Airways Bid With New Seat Plan, Better Stats

DALLAS ( TheStreet) -- Bankrupt AMR ( AAMRQ.PK) stepped up its resistance to the takeover bid by US Airways, ( LCC), unveiling new passenger amenities including lie-flat business class seats and also releasing strong April unit revenue results.

"We have a lot of challenges ahead of us," said Virasb Vahidi, AMR chief commercial officer, in an interview following a media event, held aboard a Boeing 777-200 and focused on improved technology and fleet modernization efforts. "Our transformative initiatives are a clear signal to our customers and to our people that we believe in our future."

American's fleet modernization plan includes lie-flat seats in its fleet of 47 Boeing 777-200s and in the approximately 30 767-300s it intends to keep, as well as increased legroom in a new coach product called Main Cabin Extra, which will be available to premium passengers as well as to passengers who pay extra.

"Our plan is to bring this airline back to the leadership position where it belongs," Vahidi said. Earlier, he defined American as "this nation's flag carrier." As for continuing efforts by US Airways to gain backing from labor and from Wall Street analysts for its takeover bid, Vahidi called it "a lot of noise in the background (with) no impact on the process, which needs to be followed step by step."

In the current case, AMR has exclusivity until Sept. 28 to submit a plan of reorganization. By definition, the bankruptcy process looks favorably upon a debtor-in-possession's reorganization plan, although creditors have some influence. How much is uncertain.

Vahidi noted that AMR has recently been discussing its plan with Wall Street analysts. He anticipates support, he said, "once the analysts start to understand the details."

In April, American reported that its passenger revenue per available seat mile grew at 11.6% over the same month a year earlier, apparently the highest growth in the industry, a result of high load factors and a strong pricing. Vahidi said a key factor is that, after long delays, the impact of American's joint ventures across the Atlantic and Pacific is starting to kick in: Delta ( DAL)has said several times, on earnings conference calls, that it can easily take years to realize the full benefit of such deals.

Also, Vahidi noted that since 2006, US Airways has operated at a 15% RASM deficit to American. But US Airways spokeswoman Michelle Mohr said Wednesday: "It's well-known that we have a revenue disadvantage of about 16% against our peer network carriers largely due to the location of our hubs and nature of our routes, (but) it is also well-known that we maintain a 19% cost structure advantage against the network carriers to help offset this revenue disadvantage."

As for American's fleet modernization plan, it is not going to happen immediately. In fact, the carrier will not begin work on the project until early 2014, about two years from now, and it is not known when the work will conclude. Rob Friedman, vice president of marketing, told reporters that "aircraft retrofits require a tremendous amount of lead time."

Nevertheless, he said, It was important to announce the project Wednesday in order to send "a very important message to our customers and people that we are investing in products and services to provide a world class experience."

-- Written by Ted Reed in Dallas/Fort Worth International Airport.

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

>To follow the writer on Twitter, go to http://twitter.com/tedreednc.

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