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American’s CEO says airline turnaround nearly done

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ASSOCIATED PRESS

American Airlines planes sit at a gate at Washington’s Ronald Reagan National Airport, Nov. 29, 2011.

DALLAS — The CEO of American Airlines says the company has nearly finished a bankruptcy turnaround and the only big decision left is whether to remain independent or merge with US Airways.

US Airways has been pushing for a merger that would put its executives in charge. But American CEO Thomas Horton said Monday that a deal could happen after his airline emerges from bankruptcy, which raises the possibility that American could buy US Airways.

Horton also said that provisions approved by pilots last week will help American regain passengers that it has lost to Delta Air Lines and others in New York and Los Angeles and become "a powerhouse."

Horton made the comments in an interview with the Associated Press.

Union pilots ratified a new contract on Friday, clearing the last big hurdle before AMR can exit bankruptcy court. American and parent AMR Corp. filed for bankruptcy protection in November 2011 and could emerge in early 2013.

"The financial restructuring is essentially complete," Horton said. "The open question is whether or not we decide to pursue the combination, which obviously would add some time to the (bankruptcy) process."

Horton said AMR will finish its consideration of a potential merger "soon" — the same timetable he offered in a letter to employees on Friday — but declined to be more specific.

If AMR and US Airways are to merge on friendly terms, they must decide who gets how much stock, and which airline's management would run the new company.

Horton suggested that AMR management had earned the right to lead if there is a merger, partly because AMR is positioned to emerge from bankruptcy faster than Delta and United Airlines did last decade.

"If you look at the speed and the result of this restructuring, I think it stands apart from all the others," he said. "This team has done an outstanding job and I'm very proud of them."

American's unions, however, are pushing for new management, and some analysts agree with them.

"This management team has demonstrated they're ineffective," said Vicki Bryan, an analyst with bond-research firm Gimme Credit. "They're not even paying all their bills (because of bankruptcy protection), and they're still not as profitable as US Airways."

In the third quarter, AMR lost $238 million. It would have earned $110 million excluding bankruptcy-related costs and other special items. US Airways Group Inc. earned $245 million despite having less than half of AMR's revenue.

Other industry observers believe Horton should run AMR, whether or not there is a merger.

Darryl Jenkins, a longtime airline industry consultant, said Horton is correcting old problems at American, including high labor costs and a lack of focus on attracting high-paying corporate travelers.

"He has the opportunity to be the best CEO American has ever had," Jenkins said. "He did a good job (in bankruptcy), and did it relatively quickly."

US Airways declined to comment on Horton's remarks.

Tom Hoban, a spokesman for the American Airlines pilots' union, said a merger with US Airways would make American bigger and "bring in a revitalized management team." He said employees want "leadership and vision, something has been sadly lacking" since Robert Crandall retired as American's CEO in 1998.

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