updated 1/17/2007 11:00:09 AM ET 2007-01-17T16:00:09

The parent of American Airlines, the largest U.S. carrier, said Wednesday it earned a narrow profit in the fourth quarter, defying Wall Street's prediction of a small loss by overcoming slightly disappointing revenue with cost-cutting.

AMR Corp. also posted its first full-year profit since 2000, helped by strong demand for travel that allowed carriers to raise fares throughout the year.

Chairman and Chief Executive Gerard Arpey called the results a milestone in the company's turnaround.

AMR said it earned $17 million, or seven cents per share, in the Dec. 31 quarter compared to a loss of $600 million, or $3.46 cents per share, a year earlier, when AMR was weighed down by special charges.

Analysts expected AMR to lose 13 cents per share in the most-recent quarter.

It marked AMR's third straight profitable quarter, the first time the airline company has achieved that since 2000.

Analysts who track AMR had switched from bulls to bears in late December, when the company warned that costs were rising and revenue wasn't growing as fast as Wall Street expected. That triggered the predictions of a fourth-quarter loss.

Revenue rose 4.4 percent, to $5.40 billion in the fourth quarter from $5.17 billion a year ago. Analysts expected $5.50 billion.

But the company cut its costs even more sharply, by 6.1 percent. AMR caught a break when fuel prices eased late in the year, as the company reduced its fuel bill by 8.5 percent, or $135 million — more than enough to make the difference between profit and loss for the quarter.

Fort Worth-based AMR, which also owns the American Eagle regional airline, reported that planes were slightly fuller than a year ago, as demand for travel remained healthy.

American's flights ran 80.1 percent full during the quarter, up 1.5 percentage points in a year, while Eagle flights were 73.6 percent full, an improvement of 3.2 percentage points from a year ago.

AMR said it earned $231 million, or 98 cents per share, for all of 2006 compared to a loss of $857 million or $5.18 per share in 2005. Revenue rose 8.9 percent, to $22.56 billion (euro17.48 billion) from $20.71 billion in 2005.

Arpey said AMR improved its financial position and invested in the airline during 2006 and expects to "build on our momentum in 2007."

AMR cut its total debt by $1.7 billion, but still had $18.4 billion in debt at the end of the year.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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