American Airlines Group Reports First Quarter 2016 Profit

FORT WORTH, Texas, April 22, 2016 (GLOBE NEWSWIRE) -- American Airlines Group Inc. (NASDAQ:AAL) today reported its first quarter 2016 results. The Company’s first quarter highlights include:

• Reported first quarter 2016 pre-tax profit of $1.2 billion excluding special items, and net profit of $765 million excluding special items
• First quarter 2016 adjusted earnings per diluted share rose 15 percent vs. the first quarter 2015, to $1.99¹
• Instituted a new employee profit sharing program that will pay 5 percent of pre-tax profit, excluding special items
• Returned more than $1.6 billion to stockholders through share repurchases and dividends. The Company also authorized a new $2.0 billion share repurchase program that will expire at the end of 2017
  
  

American Airlines Group’s first quarter 2016 pre-tax margin excluding special items was 12.9 percent, a record for the Company’s first quarter.

As a result of the reversal of the valuation allowance on the Company’s deferred tax assets at December 31, 2015, the Company’s 2016 results include a provision for income taxes at an effective rate of approximately 38 percent, which is substantially all non-cash due to net operating loss utilization. There was no tax provision for federal income taxes recorded in 2015.

Net profit excluding special items was $765 million, or $1.25 per diluted share. This compares to a net profit excluding special items for the 2015 first quarter of $1.2 billion, or $1.73 per diluted share. The 2016 first quarter net profit excluding special items included a provision for income taxes of $456 million, of which $453 million was non-cash.

On a GAAP (Generally Accepted Accounting Principles) basis, the Company reported a net profit of $700 million, or $1.14 per diluted share. This compares to a GAAP net profit of $932 million in the first quarter 2015, or $1.30 per diluted share. The first quarter net profit included a provision for income taxes of $417 million, of which $414 million was non-cash.

“We are pleased to report a first quarter pre-tax profit of $1.2 billion, excluding special items, and a 15 percent improvement in adjusted earnings per share,” said Doug Parker, American Airlines Chairman and CEO. “These results include a $73 million accrual related to the system-wide profit sharing plan we announced earlier this quarter. The people of American are doing an outstanding job of taking care of our customers and are the key to our future success.”

¹ Excludes special items and non-cash income tax provision. 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.

Revenue and Cost Comparisons

First quarter 2016 revenue was negatively impacted by competitive capacity growth, continued macroeconomic softness in Latin America, and foreign currency weakness. Total revenue in the first quarter was $9.4 billion, a decrease of 4.0 percent versus the first quarter 2015 on a 3.6 percent increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was 12.43 cents, down 7.5 percent versus the first quarter 2015. Consolidated passenger yield was 15.62 cents, down 7.1 percent year-over-year.

Total operating expenses in the first quarter were $8.1 billion, a decrease of 5.9 percent compared to the first quarter 2015 due primarily to a 32.7 percent decrease in consolidated fuel expense. First quarter mainline cost per available seat mile (CASM) was 11.58 cents, down 9.5 percent on a 3.1 percent increase in mainline ASMs versus the first quarter 2015. Excluding special items and fuel, mainline CASM was 9.62 cents, up 1.4 percent compared to the first quarter 2015. Regional CASM excluding net special items and fuel was 16.11 cents, down 2.2 percent on an 8.1 percent increase in regional ASMs versus the first quarter 2015. The first quarter expenses include a $73 million accrual related to the Company’s recently announced profit sharing program.

Cash and Investments

As of March 31, 2016, the Company had approximately $9.4 billion in total available liquidity, consisting of unrestricted cash and investments of $6.9 billion and $2.4 billion in undrawn revolver capacity. The Company also had a restricted cash position of $691 million.

As part of its ongoing $3.0 billion commitment to improving the customer experience, the Company continues to make product investments, including projects to enhance airport boarding areas, the Admirals Club and Flagship Lounges, in-flight connectivity, and improvements to the premium cabin.

In addition, the Company invested $1.3 billion in new aircraft during the first quarter, including 15 new mainline and 13 new regional aircraft, while retiring 22 aircraft. American has the youngest fleet of the U.S. network airlines and, over the next year, expects the average age of its mainline fleet to fall below 10 years.

Also in the first quarter, the Company returned more than $1.6 billion to its stockholders through the payment of $61 million in quarterly dividends and the repurchase of $1.6 billion of common stock, or 39.3 million shares, at an average price of $39.76 per share. In aggregate, the Company has returned approximately $6.6 billion to stockholders through share repurchases and dividends since it began its capital return program in mid-2014.

The Company’s Board of Directors has authorized a new $2.0 billion share repurchase program that will expire at the end of 2017. Since the Company began its capital return program, the Company’s Board of Directors has authorized a total of $9.0 billion of share repurchases.

Shares repurchased under the buyback programs 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 programs do 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.

The Company also declared a dividend of $0.10 per share to be paid on May 18, 2016, to stockholders of record as of May 4, 2016.

Notable Accomplishments

Integration Accomplishments

• Instituted a profit sharing program, retroactive to January 1, 2016, that will pay 5 percent of the Company’s pre-tax profit excluding special items, with an anticipated distribution to employees in early 2017
• Reached a 5-year industry-leading joint collective bargaining agreement with TWU Local 549 representing Dispatchers and Operations Specialists
• American Airlines regional partners Envoy, PSA Airlines and Piedmont Airlines each launched industry-leading Cadet Programs to help the most promising future pilots at top colleges, universities and flight schools make a smooth transition from the classroom to the cockpit

Finance, Marketing, and Network Accomplishments

• Submitted an application to the U.S. Department of Transportation proposing scheduled U.S.-Cuba service. The application includes 10 daily frequencies to Havana from the Company’s Miami hub and additional service to Havana from Charlotte, Dallas Fort Worth, Chicago, and Los Angeles. The Company’s proposal also seeks daily service between Miami and Santa Clara, Holguin, Varadero, Camaguey and Cienfuegos
• Announced an expanded commitment at LAX with 20 new flights, more jobs and more community partnerships and sponsorships
• Joined with Chicago Mayor Rahm Emanuel to announce a $1.3 billion plan to add a new runway and other improvements to Chicago O’Hare. Also announced an agreement with the City of Chicago allowing five new gates to be built at O’Hare in Terminal 3
• Issued approximately $1.1 billion in enhanced equipment trust certificates at a blended coupon of 3.967%. The proceeds from this financing were used to finance aircraft previously delivered
• Earlier this week, American was named Airfinance Journal’s “Airline of the Year” for 2015, in recognition of American’s successful integration and financing efforts
• Applied to the U.S. Department of Transportation for daily nonstop service between Los Angeles and Beijing. If approved, the service would launch on Dec. 16  
• Launched nonstop service between Los Angeles and Tokyo Haneda on the Boeing 787 Dreamliner
• Announced improvements to the Company’s lounge offerings, including the introduction of full tableside service at select gateway hubs – a first for any U.S. airline. The Flagship Dining experience will debut at JFK in early 2017 and will be introduced at our Dallas Fort Worth, Los Angeles and Miami hubs throughout 2017
• The Company plans to add Flagship Lounges at Dallas Fort Worth, Miami, and Philadelphia. The Company also plans to open new Admirals Club lounges at Houston George Bush Intercontinental and Orlando. In January, American also opened its first refurbished Admirals Club lounge in Phoenix

Community Relations Accomplishments

• Became the only airline to join the Human Rights Campaign, the nation’s largest LGBT civil rights organization, in endorsing the Equality Act, which aims to ban discrimination against LGBT people
• Raised $1 million for the Cystic Fibrosis Foundation by hosting the 31^st American Airlines Celebrity Ski weekend at Vail, Colorado. More than 60 employee and retiree volunteers hosted 600 guests for the event. Since its inception, the annual fundraiser has raised more than $36 million for the Cystic Fibrosis Foundation 
• Sponsored the 35^th annual children’s Amputee Ski Trip, flying a group of 14 teenage patients from Texas Scottish Rite Hospital for Children between DFW and Colorado
• The Company’s pilots and flight attendants donated their time and the Company donated the use of a Boeing 757 to fly 28 Medal of Honor recipients and their families from New York to Washington for National Medal of Honor Day events
• Presented a check for $115,000 to Air Compassion for Veterans, which provides medically-related air transportation to service members, veterans, and family members. Since 2010 American has donated nearly $4 million to this program
• Announced the Company would award $400,000 in grants to three non-profit Charlotte organizations: the Renaissance West Community Initiative, Goodwill Industries of the Southern Piedmont’s Opportunity Campus and the Foundation for the Carolinas

Special Items

In the first quarter, pre-tax profit and net profit included $104 million and $65 million, respectively, in special items, primarily related to merger integration.

Conference Call / Webcast Details

The Company will conduct a live audio webcast of its earnings call today at 7:30 a.m. CDT, 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 May 22.

Investor Guidance

For financial forecasting detail, please refer to the Company’s investor relations update, to be filed with the Securities and Exchange Commission on Form 8-K immediately following its 7:30 a.m. CDT conference call. This filing will be available at aa.com/investorrelations.

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 and members-elect serve nearly 1,000 destinations with 14,250 daily flights to 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

This document includes forward-looking statements within the meaning of 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 future financial and operating results, the Company’s plans, objectives, estimates, expectations and intentions, and other statements that are not historical facts. These forward-looking statements are based on the Company’s 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 the following: significant operating losses in the future; downturns in economic conditions that adversely affect the Company’s business; the impact of continued periods of high volatility in fuel costs, increased fuel prices and significant disruptions in the supply of aircraft fuel; competitive practices in the industry, including the impact of low-cost carriers, airline alliances and industry consolidation; the challenges and costs of integrating operations and realizing anticipated synergies and other benefits of the merger transaction with US Airways Group, Inc.; costs of ongoing data security compliance requirements and the impact of any significant data security breach; the Company’s substantial indebtedness and other obligations and the effect they could have on the Company’s business and liquidity; an inability to obtain sufficient financing or other capital to operate successfully and in accordance with the Company’s current business plan; increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates; the effect the Company’s high level of fixed obligations may have on its ability to fund general corporate requirements, obtain additional financing and respond to competitive developments and adverse economic and industry conditions; the Company’s significant pension and other postretirement benefit funding obligations; the impact of any failure to comply with the covenants contained in financing arrangements; provisions in credit card processing and other commercial agreements that may materially reduce the Company’s liquidity; the impact of union disputes, employee strikes and other labor-related disruptions; any inability to maintain labor costs at competitive levels; interruptions or disruptions in service at one or more of the Company’s hub airports; any inability to obtain and maintain adequate facilities, infrastructure and slots to operate the Company’s flight schedule and expand or change its route network; the Company’s reliance on third-party regional operators or third-party service providers that have the ability to affect the Company’s revenue and the public’s perception about its services; any inability to effectively manage the costs, rights and functionality of third-party distribution channels on which the Company relies; extensive government regulation, which may result in increases in the Company’s costs, disruptions to the Company’s operations, limits on the Company’s operating flexibility, reductions in the demand for air travel, and competitive disadvantages; the impact of the heavy taxation on the airline industry; changes to the Company’s business model that may not successfully increase revenues and may cause operational difficulties or decreased demand; the loss of key personnel or inability to attract and retain additional qualified personnel; the impact of conflicts overseas, terrorist attacks and ongoing security concerns; the global scope of the Company’s business and any associated economic and political instability or adverse effects of events, circumstances or government actions beyond its control, including the impact of foreign currency exchange rate fluctuations and limitations on the repatriation of cash held in foreign countries; the impact of environmental and noise regulation; the impact associated with climate change, including increased regulation to reduce emissions of greenhouse gases; the Company’s reliance on technology and automated systems and the impact of any failure of these technologies or systems; challenges in integrating the Company’s computer, communications and other technology systems; losses and adverse publicity stemming from any accident involving any of the Company’s aircraft or the aircraft of its regional or codeshare operators; delays in scheduled aircraft deliveries, or other loss of anticipated fleet capacity, and failure of new aircraft to perform as expected; the Company’s dependence on a limited number of suppliers for aircraft, aircraft engines and parts; the impact of changing economic and other conditions beyond the Company’s control, including global events that affect travel behavior such as an outbreak of a contagious disease, and volatility and fluctuations in the Company’s results of operations due to seasonality; the effect of a higher than normal number of pilot retirements and a potential shortage of pilots; the impact of possible future increases in insurance costs or reductions in available insurance coverage; the effect on the Company’s financial position and liquidity of being party to or involved in litigation; an inability to use net operating losses carried forward from prior taxable years (NOL Carryforwards); any impairment in the amount of the Company’s goodwill and an inability to realize the full value of the Company’s intangible or long-lived assets and any material impairment charges that would be recorded as a result; price volatility of the Company’s common stock; the effects of the Company’s capital deployment program and the limitation, suspension or discontinuation of the Company’s share repurchase programs or dividend payments thereunder; delay or prevention of stockholders’ ability to change the composition of the Company’s board of directors and the effect this may have on takeover attempts that some of the Company’s stockholders might consider beneficial; the effect of provisions of the Company’s Restated Certificate of Incorporation and Amended and Restated Bylaws that limit ownership and voting of its equity interests, including its common stock; the effect of limitations in the Company’s Restated Certificate of Incorporation on acquisitions and dispositions of its common stock designed to protect its NOL Carryforwards and certain other tax attributes, which may limit the liquidity of its common stock; and other economic, business, competitive, and/or regulatory factors affecting the Company’s business, including those set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (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 the Company’s other filings with the SEC. There may be other factors of which the Company is 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. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements. The Company does 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.

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