American Airlines Group - Second quarter earnings overview (Part 1 of 11)
AMR Corporation, formed in 1982, is the parent company of American Airlines and AMR Eagle Holding. In December 2013, AMR, which had filed for bankruptcy in November 2011, merged with U.S. Airways Group and changed its name to American Airlines Group. The merged entity continues to serve passengers and transport cargo but with an expanded coverage of more than 330 destinations through its primary hubs in Charlotte, Chicago, Dallas, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington.
American Airlines (AAL) is now the largest airline as measured by available seat miles (or ASMs), with a 26% market share closely. It’s followed by the two legacy airline competitors, United Continental Holdings (UAL), with a 25% share, and Delta Air Lines (DAL), with a 23% share. Together with its low cost competitors, Southwest Airlines (LUV) and JetBlue Airways (JBLU), the top five airlines comprise 91% of the total domestic market share in the U.S.
Second quarter highlights
The following financial highlights are based on American Airlines’ results on a ‘combined basis,’ which combined the pre-merger results of American Airlines and U.S. Airways in the second quarter of 2013 (or 2Q13) to make it comparable to 2Q14.
- Total revenue increased by 10.2%. Passenger revenue per available seat miles (or PRASM) in 2Q14 was 14.57 cents, an increase of 5.9% from 13.76 in 2Q13.
- Cost per available seat miles (or CASM) increased by 3.7% to 14.62 cents in 2Q14.
- Mainline and regional fuel expense was $3.4 billion in 2Q14, 2.8% higher than in 2Q13. Average price per gallon increased from $2.98 in 2Q13 to $3.03.
- Operating income increased by 40% to $1.399 million driving the operating margin up from 9.6% to 12.3%.
- The $1.5 billion net profit excluding net special charges was the highest quarterly profit recorded in the history of American Airlines.
- Cash and short-term investments was $10.3 billion and debt balance was $16.8 billion.
The company also announced that a $1-billion share repurchase program will be completed by 2015. It also declared a $0.10 dividend of $0.10 per share for the first time since 1980.
Browse this series on Market Realist:
- Part 2 - Must-know: Major integration and network developments post-merger with U.S. Airways
- Part 3 - America Airlines’ operational performance in 2Q14:
- Part 4 - Must know: American Airlines’ revenue growth by segment in 2Q14
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