Guidance takeaways:
General Overview
• Pre-tax Margin—The Company expects its first quarter pre-tax margin excluding special charges to be approximately 12 to 14 percent.
• CASM—Consolidated CASM excluding fuel and special items is expected to be up approximately 0.5 percent to 2.5 percent in 2016. This forecast incorporates the impact of the joint contracts with our pilots, flight attendants and customer service and reservation agents, but does not include the impact of any future contracts that may be ratified in 2016.
• Capacity—2016 total system capacity is expected to be up approximately 3 percent vs. 2015. Full year domestic capacity is expected to be up approximately 2 percent year-over-year, while international capacity is expected to be up approximately 6 percent vs. 2015.
• Liquidity—As of December 31, 2015, the Company had approximately $8.7 billion in total available liquidity, comprised of unrestricted cash and investments of $6.3 billion and $2.4 billion in undrawn revolver capacity. The Company also had a restricted cash position of $695 million.
• Fuel—Based on the January 27, 2016, forward curve, the Company expects to pay an average of between $1.15 and $1.20 per gallon of mainline jet fuel (including taxes) in the first quarter. Forecasted volume and fuel prices are provided in the following pages.
• Cargo / Other Revenue—Includes cargo revenue, frequent flyer revenue, ticket change fees, excess/overweight baggage fees, first and second bag fees, contract services, airport clubs and inflight service revenues.
• Taxes—As of December 31, 2015, AAG had approximately $8.0 billion of federal net operating losses (NOLs) and $4.0 billion of state NOLs, substantially all of which are expected to be available in 2016 to reduce future federal and state taxable income. In connection with the reversal of the valuation allowance at the end of the fourth quarter of 2015, the Company expects to recognize a provision for income taxes beginning in 2016 at an effective rate of approximately 38%, which will be substantially non-cash.
