AMR Combats Merger With Improved Revenue

DALLAS (TheStreet) -- Once again, bankrupt American (AAMRQ.PK) is outpacing the airline industry in terms of unit revenue gains.

The carrier reported Friday that its passenger revenue per available seat mile in May rose 7.3%, the biggest gain among the five major carriers who have so far reported May PRASM. JetBlue (JBLU) , the sixth carrier that will report PRASM, is expected to trail American based on its guidance.

American's May outperformance follows the industry's second biggest gain in the first quarter and the biggest gain in April. American, battling a takeover bid by US Airways(LCC) , has trumpeted its unit revenue gains in order to make the point that it can successfully compete on its own.

Strength in Latin America, a continuing gradual improvement in benefits from a trans-Atlantic joint venture with European partners and elimination of unprofitable flying are all considered to be factors in American's RASM gains.

The May improvement was driven "by a strong yield environment and increased international load factors," American said in a prepared statement. "We outperformed the industry in April and our strong momentum is continuing," said spokesman Sean Collins.

During the first quarter, American reported a 10.3% PRASM gain, trailing only Delta's(DAL) 11% gain. In April, American reported an 11.6% gain, the highest.

Revenue per available seat mile is among the airline industry's most widely followed metrics. It was in the news at the start of this week because Delta reported a 6% gain after guiding to a 7% gain, triggering a selloff in airline shares. Delta and US Airways shares fell 11.6% on Monday, and other carriers registered smaller declines.

Delta shares began the week at $11.37, closing Monday at $10.11. In mid-morning trading Friday, shares were down a penny to $10.27. In general, airline shares have been slowly recovering since Monday's close.

Obviously, airlines benefit from lower fuel prices. But PRASM declines are an inevitable if not immediate result because "fares tend to follow fuel prices," wrote UBS analyst Kevin Crissey, in a recent report. Moreover, because falling fuel prices tend to reflect declining economic conditions, PRASM declines also reflect diminished demand.