American Airlines might be bankrupt but it has posted record profit for the month of July. According to the company’s securities filing, it earned a record $349 million last month or $292 million if reorganization costs were removed. The news came after the Department of Justice filed a lawsuit that would try to block the planned merger between American Airlines and US Airways. The agency said that it would decrease competition for commercial air travel.

The DOJ said that the two companies would still be viable without the merger. It added that American used the bankruptcy process to reduce its costs and revitalize its fleet. The Justice Department said that a revitalized American Airlines is capable of emerging from its bankruptcy proceedings on its own by utilizing competitive cost structure, growth plans, and profitable existing business. American earned $135 million in July 2012 after reorganization costs. The carrier got $194. Billion in passenger revenue in July compared to $1.81 billion the previous year. The company’s labor costs dropped to $523 million from $597 million in July of 2012. AMR filed for Chapter 11 bankruptcy in November 2011, which followed several bankruptcies in the aviation sector that included Delta, US Airways, United and Northwest.

During that time, CEO of AMR Tom Horton said that the company was forced into bankruptcy because of cost disadvantages it faced compared to its competitors that had already gone through bankruptcies. The planned merger of US Airways and American Airlines could have created the world’s biggest airline. The two airline companies have said the deal will be advantageous to AMR’s restructuring. Earlier this month, a judge deferred approval of American Airlines’ plan to emerge from bankruptcy. The judge had concerns regarding the lawsuit brought by the Justice Department. The two companies want a November trial date to contest the lawsuit.

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