reports OUT....American Airlines Group Reports Second-Quarter Profit
7:30 am ET July 28, 2017 (Globe Newswire) Print
American Airlines Group Inc. (NASDAQ:AAL) today reported its second-quarter 2017 results, including these highlights:
-- Recorded a second-quarter 2017 pre-tax profit of $1.3 billion, or $1.5 billion excluding net special items, and net profit of $803 million, or $944 million excluding net special items
-- Reported second-quarter earnings of $1.63 per diluted share. Diluted earnings per share excluding net special items were $1.92, up 8.5 percent versus 2016
-- Reported a 7.2 percent increase in total revenue, to $11.1 billion, and a 5.7 percent increase in total revenue per available seat mile (TRASM)
-- Returned $500 million to stockholders in the second quarter through the repurchase of 10.0 million shares for $450 million and dividends of $50 million
"We are making important long-term investments in our product and our team at American Airlines. Our strong revenue growth is a credit to our more than 120,000 team members and evidence that these investments are working," said Doug Parker, Chairman and CEO. "Looking forward, we are enthusiastic about our prospects for the second half of 2017, as well as 2018 and beyond."
GAAP Non-GAAP
2Q17 2Q16 2Q17 2Q16
Total operating revenues ($ mil) $ 11,105 $ 10,363 $ 11,105 $ 10,363
Total operating expenses ($ mil) 9,570 8,612 9,367 8,547
Operating income ($ mil) 1,535 1,751 1,738 1,816
Pre-tax income ($ mil) 1,291 1,493 1,496 1,594
Pre-tax margin 11.6 % 14.4 % 13.5 % 15.4 %
Net income ($ mil) 803 950 944 1,001
Earnings per diluted share $ 1.63 $ 1.68 $ 1.92 $ 1.77
Revenue and Expenses
Strong passenger demand and improving yields drove a 7.2 percent year-over-year increase in total revenue, to $11.1 billion. Notable areas of passenger yield strength were in the Domestic, Central American and South American, and Caribbean regions. Cargo revenue was up 13.1 percent to $196 million due to a 15.1 percent increase in cargo ton miles. Other revenue was up 11.1 percent to $1.3 billion primarily due to the new co-branded credit card agreements that became effective in the third quarter of 2016. Second-quarter TRASM increased by 5.7 percent, on a 1.4 percent increase in total available seat miles.
Total second-quarter operating expenses were $9.6 billion, up 11.1 percent year-over-year due primarily to a 15.4 percent increase in consolidated fuel expense and a 12.5 percent increase in salaries and benefits resulting from the company's recent investments in its team members. Total second-quarter cost per available seat mile (CASM) was 13.34 cents, up 9.6 percent. Excluding fuel and special items, total CASM was 10.49 cents, up 6.8 percent.
Commercial Initiatives
American has now expanded Basic Economy into 78 markets, including into Canada. Early results continue to be in-line with initial expectations, with approximately half of American Airlines customers buying up to Main Cabin when given the option between that and Basic Economy. The company expects to roll out Basic Economy across the rest of its domestic network by the end of September.
With an average premium of more than $400, customer adoption of the company's new Premium Economy product has been strong. These seats are now being installed on American's Boeing 777-200 aircraft. The company expects to retrofit most of its other widebody aircraft with this highly-differentiated seating choice for international customers by the end of 2018.
As part of its $200 million investment in the luxury travel experience, American debuted its Flagship First Dining experience and newly-renovated Flagship Lounge at New York John F. Kennedy International Airport. In addition, access to Flagship Lounges has been expanded to include Business Class customers traveling on qualifying international and transcontinental flights. Additional Flagship Lounge renovations and Flagship First Dining locations are planned at other hubs.
American Airlines President Robert Isom said, "Our investments in our product and our team are beginning to pay real dividends as we give customers more reasons to fly on American. When combined with new revenue management tools and sales initiatives targeting high yielding corporate customers, we believe our revenue growth potential is strong.
"We expect third-quarter TRASM to increase approximately 0.5 to 2.5 percent year-over-year, which reflects continued improvement in customer demand for corporate and leisure travel. We expect third-quarter pre-tax margin excluding special items to be between 10.0 and 12.0 percent. We also expect our fourth-quarter TRASM growth to exceed the third quarter's growth rate," Isom said.
Capital Investments, Fleet, and Shareholder Returns
American plans to invest $4.1 billion in new aircraft this year as it continues to renew its fleet. During the quarter, the company invested $1.1 billion in aircraft as it took delivery of 16 mainline aircraft and 4 regional aircraft. These new deliveries will replace aircraft that are expected to leave the fleet. In addition, the company expects to invest $1.6 billion in non-aircraft capital expenditures in 2017 focused on integrating the airline, product enhancements, and operational improvements.
Since mid-2014, the company has returned more than $10.7 billion to stockholders primarily through share repurchases and dividends, and reduced the share count by 35 percent to 487.7 million shares. As of June 30, the company had approximately $1.0 billion remaining of its $2.0 billion share repurchase authority.
The company declared a dividend of $0.10 per share, to be paid on August 28, 2017, to stockholders of record as of August 14, 2017.
Investor Update
For additional financial forecasting detail, please refer to the company's investor relations update, filed with the Securities and Exchange Commission on Form 8-K. This filing will be available at aa.com/investorrelations.
Conference Call / Webcast Details
The company will conduct a live audio webcast of its earnings call today at 7:30 a.m. CT, 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 August 28.
Notes
-- In the second quarter, the company recognized $205 million in net special items before the effect of income taxes, principally consisting of merger integration expenses, fleet restructuring expenses driven by the merger and certain one-time charges to adjust the vacation accruals as a result of the salary increases for our pilots and flight attendants. See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.
-- American is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time.
-- Share repurchases under the buyback program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors. The program does not obligate the company to repurchase any specific number of shares or continue a dividend for any fixed period, and may be suspended at any time at the company's discretion.
About American Airlines Group
American Airlines and American Eagle offer an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries. American has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. American is a founding member of the oneworld alliance, whose members serve more than 1,000 destinations with about 14,250 daily flights to over 150 countries. Shares of American Airlines Group Inc. trade on Nasdaq under the ticker symbol AAL. In 2015, its stock joined the S&P 500 index. Connect with American on Twitter @AmericanAir and at Facebook.com/AmericanAirlines.
Cautionary Statement Regarding Forward-Looking Statements and Information
Certain of the statements contained in this report should be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as "may," "will," "expect," "intend," "anticipate," "believe," "estimate," "plan," "project," "could," "should," "would," "continue," "seek," "target," "guidance," "outlook," "if current trends continue," "optimistic," "forecast" and other similar words. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (especially in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A. Risk Factors), and other risks and uncertainties listed from time to time in our other filings with the Securities and Exchange Commission. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements.
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