American Airlines Makes $1.7B Record Profit In 2015
American Airlines (AAL) nearly doubled its net profit for the third quarter with $1.7 billion, or $2.49 per diluted share, based on largely on lower fuel costs.
The results compared to $942 million the airline had earned in July, August and September 2014, or $1.28 per diluted share
When not counting special net charges, the $1.9 billion in earnings represented the highest quarterly profit in company history.
The announcement came a week after American combined its reservation system with the former US Airways, after a merger approved in December 2013. The switch occurred without any disruptions to the operation or customer service, the company said.
“Our team did it flawlessly. We couldn’t be happier,” CEO Doug Parker told analysts during a conference call. “We are well on our way to building the best airline in the world.”
Jim Corridore, equity analyst with S&P Capital IQ, kept a “strong buy” recommendation for American shares as the company continues to use its cash flow to buy back stock.
Jamie Baker and Mark Streeter of J.P. Morgan said they were impressed with American’s pace of buybacks, but that it lags its peers in retaining savings from lower fuel costs.
American Airlines Group stock closed down 0.7 per cent Friday at $45.67.
The financial results were based on a drop in revenues combined with a larger drop in expenses. Total revenue for the quarter was $10.7 billion, a decline of 3.9 per cent from a year earlier. But total operating expenses were $8.7 billion, a decrease of 11.9 per cent compared to a year earlier.
Fuel costs dropped 44 per cent compared to a year earlier, to nearly $1.6 billion for the quarter.
Special operating charges during the quarter totaled $165 million. These included $198 million in merger-related expenses and $38 million to dissolve a joint venture with Texas Aero Engine Service. The charges were offset by a $66 million credit from proceeds of a legal settlement.
The airline returned $1.63 billion to shareholders through a $1.56 billion stock buyback and a $67 million dividend. The company’s board also authorized a $2 billion buyback by the end of 2016. A dividend of 10 cents per share will be paid Nov. 19.
“We are bullish on the future,” Parker said of the buybacks.
Accomplishments during the quarter included a tentative agreement with 14,000 customer-service and reservation agents represented by Communications Workers of America-International Brotherhood of Teamsters.
The airline expanded its baggage-tracking technology to the entire airline, enabling travelers to track luggage in real time. And American provided the charter service for Pope Francis visit to the U.S. in September.