Wednesday, Nov. 28, 2012

However, the carrier posted a $238 million third-quarter loss, mostly from charges related to reorganization items and severance costs for buyouts. Without the charges, AMR would have made a profit of $110 million.

AMR's monthly unit revenue has steadily improved since the spring, and the carrier has signed new regional feed contracts with SkyWest and ExpressJet.

Recently, it renegotiated its financial contract with BNDES, the Brazilian Development Bank, on its 216 Embraer aircraft, giving AMR more flexibility on how it will operate the smaller regional jets.

American had asked all employee groups to cut costs by 20 percent. But after months of negotiations, the unions, except for the pilots, agreed to cut costs by 17 percent.

Missed opportunities

A contract agreement being voted on by pilots does not give American enough flexibility on code sharing and regional feed contracts, Swelbar said.

American had wanted to impose work rules that would allow for more comprehensive code sharing with other domestic carriers, such as JetBlue. But the bankruptcy judge ruled that the airline was overreaching.

Swelbar said expanded code sharing would have bolstered American's revenue, if it remains a stand-alone carrier, without adding unnecessary capacity to the industry.

"There were some opportunities to do something unique to the industry while their costs were going to come down," Swelbar said. "I don't know if American looks terribly different from the rest of the industry."

Without additional domestic capacity to funnel passengers to more profitable international routes, American will likely continue to struggle as a stand-alone carrier, said Bob Herbst, founder of AirlineFinancials.com.

A merger with US Airways would give American the domestic network it needs to compete with United and Delta, he said.

"American gave up a lot to get these labor agreements," Herbst said. "I just don't think they are going to have the revenue to support it."

"The pilot contract is the most important final hurdle, and I think upon reaching that agreement or not, we'll be prepared to put together the plan of reorganization," Horton said.

AMR has until Jan. 28 to file a reorganization plan with the Bankruptcy Court, and creditors will have 60 days to consider it.

Analysts say creditors and the court are unlikely to sign off without an approved pilots contract.

The unsecured creditors committee also appears to be considering a merger offer from US Airways supported by American's three largest unions.

"We believe a tacit agreement exists between [the pilots union] and the [creditors committee] simply because APA leadership is endorsing this [agreement] and APA leadership wants a merger with [US Airways]," Keay wrote in a research note to investors Friday.

"If APA members ratify the [agreement] and no merger is announced, we believe AMR pilots would move to recall much APA leadership."

"Unsecured creditors, who may ultimately determine which direction the company goes, are a true unknown, and though we believe this group tends to side with AMR management, they may ultimately decide where the best value lies for their claims in reviewing all deals," Maxim Group analyst Ray Neidl told investors Monday.