American Airlines returned to the black in the fourth quarter of 2012 as it slashed labour costs and reaped other benefits from entering Chapter 11 bankruptcy protection.

Parent company AMR Corporation said that net profit came in at $262 million compared with a loss of $1.1 billion in the fourth quarter of 2011.

A full-year net loss of $1.9 billion was reported for 2012. Excluding reorganisation and special items, the loss was $130 million, a $932 million improvement over 2011.

British Airway’s US partner cut labour costs by 17% as it slashed thousands of jobs and reworked its union contracts to cut costs.

One-time gains such as an income tax benefit and the settlement of a business dispute also helped. AMR would have lost $88 million in the three months without those.

Revenue was down to $5.94 billion from $5.96 billion a year earlier.

The quarter included disruption caused by Superstorm Sandy and fallout from what the company called a pilot work slowdown.

Chairman and chief executive Thomas Horton has promised a decision within weeks as to whether American should merge with US Airways or exit bankruptcy on its own.

He said: “We have made enormous progress towards building the new American.

“It is remarkable what the American team has been able to accomplish, including generating record revenue and a return to an operating profit for the year while restructuring every aspect of our company.

“Our momentum is growing toward emerging as a strong, healthy and vibrant competitor. In fact, with what we have accomplished, we expect to show strong results beginning in the first quarter of 2013.”

American’s joint business agreement with British Airways and Iberia parent IAG over the Atlantic was instrumental in driving unit revenue improvements of 5.9%