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American Air earns slight profit

/ Source: The Associated Press

The parent of American Airlines reported a tiny profit in the third quarter, breaking a string of losses at the world’s largest carrier that began more than two years ago and worsened after the terror attacks of September 2001.

AMR Corp. said it earned about $1 million in the July-September period on revenue of $4.60 billion. In the same period last year, AMR lost $924 million.

Analysts had expected AMR to lose 41 cents a share in the most recent quarter.

The report marked a stunning turnaround for an airline that nearly filed for bankruptcy in April.

“We are making good progress under the focus and discipline of our four-point turnaround plan,” chief executive Gerard Arpey said in a statement issued by the company.

Arpey added, however, that the third quarter, which includes most of the summer vacation travel period, is a peak season for the airline industry, “and under normal circumstances, we should be doing much better at this time of year than simply breaking even.”

Arpey said the third-quarter results were “unmistakable evidence that we are building critical momentum” to cut costs.

The airline won cost concessions from unions and other employees in April that will eventually amount to $1.8 billion a year. The concessions included thousands of layoffs and reduced pay and benefits for remaining employees.

Those cuts produced savings of $400 million in the third quarter and are expected to total another $450 million in the fourth quarter, an AMR official said.

The $4.60 billion in revenue marked a 1.8 percent increase from a year earlier. American’s revenue per available seats multiplied by miles flown, a key measure in the airline industry, rose 8.1 percent. American reported a slight increase in revenue for each passenger mile traveled, the first such increase since early 2001.

At the same time, the carrier reported an 8.6 percent decline in per-passenger costs.

AMR lost $6.4 billion in the past 2½ years.

Analysts said American benefitted from better-than-expected demand for vacation travel over the summer, and they credited the airline’s cost-cutting moves.

“It’s the reduced costs that are bearing fruit,” said Ray Neidl, an analyst with Blaylock & Partners, an investment-banking firm.

Also on Wednesday, American announced that it would keep operating all three of its maintenance operations after getting $100 million in incentives to upgrade its Kansas City facility.

The agreement includes money for hangar improvements and facility modifications, as well as tax credits for asbestos remediation.

American had considered closing a base after reducing the size of its fleet. Its other bases are in Tulsa and Fort Worth.