Published on November 16th, 2015 | by Jim Lee0
American Airlines Group reports highest quarterly profit ever as US Airways passes into history
From 17th October, all US Airways and American Airlines flights began operating as American Airlines and their website www.aa.com/ proclaimed that there were now, ‘One airline’, ‘One website’, ‘One reservation system’, with all travel policies and elite benefits being fully aligned, creating a seamless travel experience. The previous day, the last US Airways commercial flight, the US1939 was operated by Airbus A321-200 N152UW routing Philadelphia – Charlotte – Phoenix – San Francisco, – Philadelphia (see video). It was the last aircraft to use the ‘US’ flight code, as the brand was consigned to history. The flight coincided with the introduction of a single, unified reservations system, one of the final steps in the US Airways’ $11 billion (around €10.25 billion) merger with American Airlines. The complex ‘cutover’ was accomplished without any disruptions to the operation or customer service. In addition all signs at airport served by either carrier are now labelled as American and there is a new look to the brand.
However, it will take some time for other changes to take place, for example, some staff will still wear US Airways uniforms for the next few months, and American Airlines Group (‘the Group’) does not expect to have all aircraft repainted in the new livery until the fourth quarter of 2017. So far the repainting has targeted two groups – the AA fleet in the old (pre-January 2013) livery and the 331 US Airways aircraft transferred on 8th April 2015 when the Federal Aviation Administration (FAA) granted the single operating certificate for both carriers. The last US Airways aircraft of the wide-body fleet, an Airbus A330, was repainted in late March with the new livery. In all 39 long haul aircraft transferred, 15 Airbus A330-200s, 9 Airbus A330-300s and 15 Boeing 757-200s (International).
Record quarterly net profit reported
On 23rd October, the Group reported its third quarter 2015 results, just one week after completing the critical merger milestone outlined above. The net profit of $1.9 billion (around €1.77 billion) excluding net special charges, was a 54% increase versus the third quarter 2014 and was the highest quarterly profit in the Company’s history. A GAAP net profit of $1.7 billion (around €1.58 billion), an 80% increase versus last year’s third quarter, was also recorded. The net profit represented $2.77 (around €2.58) per diluted share or $2.49 (around €2.32) per diluted share on a GAAP basis. The Group’s third quarter 2015 pre-tax margin (excluding net special charges) was a record 17.7%, up 6.7 percentage points from the same period last year. Total revenue in the third quarter was $10.7 billion (around €9.96 billion), a decrease of 3.9% versus the third quarter 2014 on a 2.9% increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was 13.16 cents (€0.12), down 6.8% versus the third quarter 2014. Consolidated passenger yield was 15.37 cents (€0.14), down 9.2% year-over-year.
Total operating expenses in the third quarter were $8.7 billion (around €8.1 billion), a decrease of 11.9% compared to the third quarter 2014, due primarily to a 43.5% decrease in consolidated fuel expense. Third quarter mainline cost per available seat mile (CASM) was 11.33 cents (€0.11), down 14.7% on a 2.6% increase in mainline ASMs versus the third quarter 2014. Excluding net special charges and fuel, mainline CASM was 8.56 cents (€0.08), up 2.6% compared to the third quarter 2014. Regional CASM excluding special charges and fuel was 15.78 cents (€0.15), up 1.7% on a 5.0% increase in regional ASMs versus the third quarter 2014. As of 30th September 2015, the Group had approximately $9.6 billion (around €8.94 billion) in total cash and short-term investments, of which $710 million (around €661 million) was restricted, and an undrawn revolving credit facility of $1.8 billion (around €1.68 billion).
The Group continues to make significant investments in the airline through its extensive fleet renewal program, giving it the youngest fleet of the U.S. network airlines. In the third quarter, it took delivery of 16 new mainline and 15 new regional aircraft and retired 36 mainline and nine regional aircraft.
In the third quarter, the Group returned $1.63 billion (around €1.52 billion) to its shareholders through the payment of $67 million (around €62.4 million) in quarterly dividends and the repurchase of $1.56 billion (around €1.45 billion) of common stock, or 38.4 million shares, at an average price of $40.56 (€37.78) per share. When combined with the dividends and shares repurchased during the first half of 2015, the Group has returned approximately $2.7 billion (around €2.51 billion) to its shareholders this year. In addition, the Company’s Board of Directors has authorised a new $2 billion (around €1.86 billion) share repurchase program to be completed by the end of 2016. This brings the total amount authorised in 2015 for share repurchases to $6 billion (around €5.58 billion). The Group also declared a dividend of $0.10 (€0. 09) per share to be paid on 19th November 2015, to shareholders of record as of 5th November 2015.
Commenting on the results Chairman and CEO Doug Parker said; “We are extremely pleased to report another quarter of record profits thanks to the outstanding work of the American Airlines team”. He added “We are particularly proud of the remarkable job our team did this week to move American onto a single reservations system without any operational disruption. Because of their great work, our customers now have seamless access to the full network of the new American Airlines – the best and largest airline network in the world.”
As well as announcing its third quarter results on 23rd October, the Group also reported some notable accomplishments namely:-
- It reached a tentative agreement with the Communications Workers of America – International Brotherhood of Teamsters (CWA-IBT) for a new joint collective bargaining agreement covering the airline’s 14,000 airport customer service and reservation agents.
- Opened the Company’s new state-of-the-art Robert W. Baker Integrated Operations Centre in Fort Worth.
- Expanded bag tracking technology to the whole airline, enabling customers to track checked baggage in real-time.
- Provided charter service for Pope Francis’ first official visit to the U.S.
- Announced an expansion of the Company’s agreement with Alaska Airlines that allows full access of American’s network to Alaska customers as well as reciprocal airport club access.
- Awarded $565,000 (around €526,800) in college scholarships to 210 dependents of employees through the American Airlines Education Foundation, including 40 for first-generation college attendees.
- Donated an MD80 aircraft to Oklahoma State University’s College of Engineering, Architecture and Technology’s Mechanical and Aerospace Engineering program. The aircraft will serve as a learning laboratory for college students and be used to provide science, technology, engineering and math lessons for 500 K-12 students per year.
Impact on Irish operations
The main impact of the consolidation of the two airlines is that all Irish all flights will now operate under the ‘AA’ flight-code. It comes as American Airlines suspended both its Chicago-Dublin and New York JFK-Dublin routes for the winter, similar to last year. This leaves just the Philadelphia – Dublin route, previously operated as a US Airways service, which last winter, had a six per week frequency, operated by a mix of Boeing 767-200s and Boeing 757s. This winter it will operate as the AA722/3, arriving in Dublin at 08:30 and departing at 10:40. Other former US Airways services, Charlotte-Dublin and Philadelphia-Shannon do not operate over the winter.
US Airways – a long a proud history
US Airways was originally founded in 1937 as All American Aviation. The airline initially served the Ohio River valley from its hub in Pittsburgh before being renamed Allegheny Airlines in 1953. Allegheny operated primarily along the US East Coast and subsequently it acquired regional carriers Lake Central Airlines in 1968 and Mohawk Airlines in 1972. With the deregulation of the US airline industry in 1979, Allegheny renamed itself US Air and then US Airways as it expanded its scope to cover the entire United States. Along the way it acquired several other carriers such as PSA, Piedmont Airlines, Trump Shuttle, and finally America West Airlines prior to its merger with American Airlines.
Although it was the US Airways Group, the parent company of US Airways, that expressed interest in taking over AMR Corporation, the parent company of American Airlines in January 2012, the combined business began trading under the new name of American Airlines Group on 9th December 2013. The combined airlines formed the largest airline in the world. US Airways’ CEO, Doug Parker, became CEO of the new company. The integration of American Airlines and US Airways was completed when the Federal Aviation Administration granted a single operating certificate for both carriers on 8th April 2015 (see ‘Goodbye, US Airways video’ here).