American Puts Positive Spin on Merged Results
Year-end 2013 financial results from the newly reconstituted American Airlines Group have quickly established that the long-awaited merger of AMR Corporation with US Airways has resulted in a carrier more viable than the sum of its previously separate parts. After clearing an initial anti-trust objection by the U.S. Justice Department, the two airlines finally completed their merger on Dec. 9, 2013. For the whole of 2013, the combined businesses reported a net profit of $1.9 billion—an almost four-fold increase on the equivalent $407 million profit the two companies earned in 2012. Similarly, for the fourth quarter of 2013 alone, the merged entity recorded a $436 million net profit, representing a marked improvement on the combined net loss of $42 million for the same period in 2012.
However, the positive reckoning of the new partners’ combined performance is not based on U.S. generally accepted accounting principles (GAAP) and excludes special net charges associated with the merger. Using GAAP accountancy policies, the American Airlines Group showed a $1.83 billion net loss for 2013, which represents a marginal improvement on the $1.87 billion loss in 2012 on the same basis. The GAAP process takes account only of US Airways’ contribution to the combined results for the remaining 22 days in 2013 following the December 9 merger. Net special charges amounted to $3.1 billion.
In a January 28 statement, the new group called a comparison of combined year-over-year results–taking into account US Airways’ results for the whole of 2013–“more meaningful.”
“The early returns on our merger are very positive,” commented American Airlines Group CEO Doug Parker. “Our teams are working well together and our customers are already beginning to see the benefits of our combined network.”
In addition to anticipated cost savings, American Airlines and US Airways have already launched an initial phase of code-sharing arrangements for their respective services. They also provide reciprocal benefits through their loyalty programs.