American Airlines Group Reports Record First Quarter 2014 Financial Results

For the first quarter 2014, American Airlines Group reported a record GAAP net profit of $480 million. This compares to a net loss of $341 million in the first quarter 2013. The company's GAAP results for the first quarter 2013 reflect AMR Corporation prior to the merger.

The company believes it is more meaningful to compare year-over-year results for American Airlines and US Airways on a combined basis, which is a non-GAAP formulation that combines the results for AMR Corporation and US Airways Group. Therefore, it includes the results of US Airways Group for the full period. See the accompanying notes in the Financial Tables section of this press release for further explanation of this presentation, including a reconciliation of GAAP to non-GAAP financial information.

First quarter 2014 net profit excluding net special credits was a record $402 million. This compares to a combined non-GAAP net profit of $62 million excluding net special charges for the same period in 2013. Excluding net special credits, first quarter 2014 diluted earnings per share was $0.54.

"We are very pleased to report a record profit in our first full quarter as a merged company," said Doug Parker, CEO of American Airlines Group. "Our team of dedicated professionals did an excellent job of taking care of our customers despite particularly difficult weather conditions throughout the quarter. We are excited for the future and expect our synergies to build as we continue to integrate our operations."

Merger Integration 

Since closing the merger on Dec. 9, 2013, the company has made significant progress in integrating American Airlines and US Airways. Key accomplishments:

  • Launched the world's largest codeshare, offering customers improved access to the company's global network by allowing them to book flights on both airlines' networks
  • Provided reciprocal benefits for airport lounge and frequent flyer elite members, including priority check-in, waiving fees for checked bags, complimentary access to preferred seats, priority security lines, early boarding and priority baggage delivery
  • Enabled AAdvantage® and Dividend Miles® members to earn and redeem miles when traveling across either airline's network
  • Joined operations at 58 airports, including Phoenix and Miami hubs
  • Moved US Airways into the oneworld alliance on March 31 and to the trans-Atlantic joint venture with American, British Airways, Iberia and Finnair on April 3
  • Aligned award travel options, checked baggage policies and inflight services for First and Business Class customers
  • Announced Sabre as the new Passenger Services System for the combined company
  • Closed the sale of the slot divestitures required by the U.S. Department of Justice at Ronald Reagan Washington National Airport (DCA). In total, the company received $381 million in cash from the DCA sales and the sale of slots at New York'sLaGuardia (LGA) Airport, which closed in the fourth quarter 2013. 

Revenue and Cost Comparisons

On a combined basis, total revenues in the first quarter were a record $10 billion, up 5.6 percent versus the first quarter 2013 on a 2.0 percent increase in total available seat miles (ASMs). Driven by a record yield of 17.03 cents, up 3.2 percent year-over-year, combined consolidated passenger revenue per ASM (PRASM) was also a record for the first quarter at 13.67 cents, up 2.9 percent versus the first quarter 2013.

Total combined operating expenses in the first quarter were $9.3 billion, down 0.3 percent over first quarter 2013. Combined first quarter mainline cost per available seat mile (CASM) was 13.50 cents, down 2.7 percent on a 2.7 percent increase in mainline ASMs versus first quarter 2013. This cost improvement was largely due to a 4.8 percent decrease in year-over-year mainline fuel prices. Excluding special charges, fuel and profit sharing, mainline CASM was up 4.0 percent compared to the first quarter 2013, at 8.96 cents. Regional CASM excluding special charges and fuel was 16.62 cents, up 5.0 percent on a 3.2 percent decrease in regional ASMs versus first quarter 2013. 

Liquidity

As of March 31, 2014, American had approximately $10.6 billion in total cash and short-term investments, of which $947 million was restricted. The company also has an undrawn revolving credit facility of $1.0 billion. Approximately $750 million of the company's unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable exchange rate of 6.32 bolivars to the dollar. This includes approximately $94 million valued at 4.3 bolivars, approximately $611 million valued at 6.3 bolivars and approximately $45 million valued at 10.7 bolivars, with the rate depending on the date the company submitted its repatriation request to the Venezuelan government.

In the first quarter of 2014, the Venezuelan government announced that a newly-implemented system (SICAD I) will determine the exchange rate (which fluctuates as determined by weekly auctions and at March 31, 2014 was 10.7 bolivars to the dollar) for repatriation of cash proceeds from ticket sales after January 1, 2014, and introduced new procedures for approval of repatriation of local currency. The company is continuing to work with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency. The company is monitoring this situation closely and continues to evaluate its holdings of Venezuelan bolivars for potential impairment.

Since the merger, the company paid $542 million in tax withholdings for employees in lieu of issuing shares of common stock as compensation as permitted under the Plan of Reorganization, thereby reducing the number of shares expected to be issued under the Plan by approximately 20 million. Additionally, the company has elected to utilize the cash settlement feature for the remaining $22 million principal amount of US Airways Group 7.25% convertible notes due May 15, 2014, which will further reduce diluted shares by approximately 4 million shares. 

Special Items

In the first quarter, the company recognized a combined total of $78 million in net special credits, including:

  • $137 million in net special credits consisting primarily of the gain on the sale of slots at Reagan National Airport offset in part by integration and merger-related expenses
  • $47 million in non-operating special charges due primarily to non-cash interest accretion on bankruptcy settlement obligations
  • $8 million in non-cash deferred income tax provision related to certain indefinite-lived intangible assets
  • $4 million in regional non-operating charges

Additional Integration Related Developments

  • Distributed $11 million to employees for baggage handling and on-time performance in the month of January; this distribution of $100 per employee is part of the company's Triple Play program which measures on-time arrivals and baggage performance as reported in the DOT's Air Travel Consumer Report (ATCR)
  • Conducted first joint Captain Leadership Training with newly promoted captains from both airlines
  • On April 9, Piedmont flight attendants ratified a new five-year Collective Bargaining Agreement
  • Opened a new Admirals Club lounge at the company's Philadelphia (PHL) hub

Fleet/Network Developments

  • As part of its plan to modernize its fleet by replacing older aircraft with newer, more fuel-efficient aircraft, the company inducted 12 new Airbus A321T aircraft into service between New York'sJohn F. Kennedy International Airport (JFK) and Los Angeles International Airport (LAX), and JFK and San Francisco International Airport (SFO). American is now the only U.S. carrier to offer three classes of service between these key markets.  The company also took delivery of one Airbus A330-200 aircraft, five Boeing 737-800 aircraft and one Boeing 777-300 aircraft during the first quarter.
  • Revealed new Boeing 767-300 and 777-200ER cabin retrofits, which feature lie-flat seats with direct aisle access in Business Class
  • In April 2014, the company exercised its option to purchase (and thus terminated its existing lease financing arrangements) for 62 Airbus A320 family aircraft scheduled to be delivered between first quarter 2015 and third quarter 2017. In connection with this decision, the company also exercised its right to convert firm orders for 30 Airbus A320 family NEO aircraft (scheduled to be delivered in 2021 and 2022) to options to acquire such aircraft.

Community Relations Developments

  • Raised and contributed $750,000 to the Cystic Fibrosis Foundation through the company's 29th Annual Celebrity Ski event in Vail, Colo. 
  • Completed 230 employee volunteer events and distributed more than $500,000 in grants in the communities American serves
  • Raised more than $55,000 in employee contributions for the American Airlines and American Eagle Family Fund and the US Airways Education Foundation through the online auction of a trip to Toulouse, France, to take delivery of a new Airbus A330 aircraft
  • Provided travel to 42 children and their families for critical surgeries through the company's Kids in Need program. Nearly 18 million frequent flyers donated more than 48 million miles to the program, which supports the mission of 40 children's organizations and makes travel possible for children in need.
  • Transported and worked with more than 60 assistance dogs in partnership with Assistance Dogs International (ADI) through employees who volunteer with the company's Puppies in Flight program

Conference Call / Webcast Details

The company will conduct a live audio webcast of its earnings call today at 10:30 a.m. CDT, which will be available to the public on a listen-only basis at aa.com/investorrelations. An archive of the webcast will be available on the website through May 24, 2014.

Investor Guidance

Investor guidance will be available at aa.com/investorrelations immediately following the 10:30 a.m. CDT conference call. The company will provide guidance on a combined basis related to cost per available seat mile (CASM) excluding special items and fuel, fuel prices, other revenues and estimated interest expense/income on the Presentations/Updates section of its Investor Relations website. This update will also include information regarding capacity guidance, fleet plans and estimated capital spending for 2014.

Source = American Airlines Group
Pin It
Add Comment Register



Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>