American Airlines Group Inc (AAL)

[CRichard]

http://finance.yahoo.com/news/american-margin-surge-higher-yields-190644514.html

American Airlines (AAL) reported a record net profit of $597 million in 4Q14 compared to a loss of $1,947 in 4Q13. This was driven by lower interest expenses, which decreased by 21% during the quarter. Plus, tax expenses decreased to $30 million in 4Q14, compared to $270 million incurred in 4Q13.

Reorganization expenses
Reorganization expenses amounting to $2,220 million in 4Q13 led to losses in 4Q14. The reorganization expense was related to aircraft and facility financing renegotiations and professional fees after filing for relief under Chapter 11. American had $9.5 billion gross net operating losses as on December 31, 2013, that could reduce its tax expense during the year.

American’s net margin in 2014 was 6.8%, higher than Delta Air Lines’s (DAL) 1.6%, United Continental Holdings’s (UAL) 2.9%, and Southwest Airlines’s (LUV) 6.1%. However, American’s net margin was lower than Alaska Air Group’s (ALK) 11.3% and JetBlue Airways’s (JBLU) 6.9%.


For 1Q15, management expects the company’s pre-tax margin to be between 13%–15%. Higher margins of airline stocks have a positive impact on Transportation ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) that invest 30%–40% of their holdings in airline stocks.