American Airlines
An American Airlines jet. Reuters

American Airlines (NASDAQ:AAL), the world’s largest airline, is expected to report its first earnings report since its merger with US Airways (NYSE:LCC) last month. The synergy of the two companies is predicted to help revenues of the newly formed company increase by 66.8 percent, in part because the number of winter passengers for both airlines came in significantly above expectations.

The Dallas-based company will report fourth-quarter earnings on Tuesday before the market opens. Analysts polled by Thomson Reuters expect on average American’s net income to be around $394 million, compared with a loss of $88 million in the year earlier quarter, while earnings per share (EPS) are seen soaring to 55 cents compared with a loss of 23 cents a year earlier.

Revenue is expected to rise from $5.94 billion to $9.91 billion.

American’s earnings have been difficult to interpret because of accounting challenges relating to US Airways being in bankruptcy at the time of the merger. The key issues for American are the cost of integration, which is still in the very early stages and are unlikely to impact fourth-quarter earnings because the company had been merged for only 22 days before the end of the fourth quarter.

According to a note from financial firm Raymond James, American’s 9 percent year-over-year passenger revenue per available seat mile (PRASM) increase in December was in line with Delta Air Lines (NYSE:DAL) and United Continental's (NYSE:UAL) 10 percent increase. US Airways 12 percent year-on-year was higher, like the result of the advantageous timing of Thanksgiving.

“The track record of merged airlines on revenue synergy execution is mixed and harder to measure,” wrote Savanthi Syth, a Raymond James airline analyst. “Thus, we are more cautious on management’s targeted $900 million in annual revenue synergies, particularly contributions from regaining share from Delta and United, and are forecasting passenger unit revenue growth at largely similar levels to that of the industry in 2014 and 2015.”

The merger created the largest U.S. airline, accounting for 25 percent of 2013 of domestic seats, followed by Southwest Airlines (NYSE:LUV) at 22 percent, Delta at 21 percent and United at 17 percent.

According to American Airlines media, their fourth-quarter earnings results will include a small addendum on US Airways’ results from the fourth quarter.