American Airlines shows signs of a turnaround

American Airlines' planes are parked at a gate at LaGuardia Airport in New York in this 2011 file photo. / Associated Press

DALLAS — Eight months into a bankruptcy that was years in the making, American Airlines is showing signs of finally turning itself around and regaining its lost glory.

American’s parent company, AMR Corp., reported on Wednesday that revenue set a record in the second quarter as fares rose and more passengers filled its planes. And it turned an operating profit, minus the millions it spent on bankruptcy lawyers and severance pay.

The airline is cutting costs and making progress in labor negotiations. It’s even losing fewer bags.

But the nation’s third-biggest airline still faces huge challenges to succeed against United and Delta, which are similar to American in structure but much bigger. They’re also profitable.

Analysts say American must expand and improve its route network to attract high-paying business travelers. It’s weak on both the East and West coasts. It ranks below average in government ratings for on-time flights and consumer complaints.

US Airways CEO Doug Parker says the best way for American to grow its network is by merging with his airline. Many Wall Street analysts agree. American’s unions support a potential US Airways takeover because they believe it will mean fewer layoffs and other concessions.

AMR CEO Thomas Horton has preferred a go-it-alone strategy, although he said last week that AMR will examine merger possibilities. Bankruptcy creditors will decide between Parker’s proposal, Horton’s independent path and any other plans that pop up.

Controlling its fate

To control its own fate, AMR will have to prove to creditors that it can do better on its own than it would if paired with US Airways. Its report Wednesday on second-quarter financial results might bolster its case.

AMR narrowed its second-quarter loss to $241 million from $286 million a year ago. But excluding bankruptcy-related costs ranging from employee severance obligations to legal fees, AMR said it would have earned $95 million — its first operating profit for the early-summer quarter since 2007.