Is it a vast cash machine, is it a Federal Reserve printing press – No it’s AAL!

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By TESTCustomwebLP TESTCustomwebLP January 27, 2015 21:14

Is it a vast cash machine, is it a Federal Reserve printing press – No it’s AAL!

American Airlines Group (AAL) revenue is up 2.2% but RPKs are down 1% while ASKs are up 1.7%, operating expenses are down 4.1% while fuel costs fell 17.3%.

AAL has reported record fourth quarter 2014 net profit excluding net special charges of $1.1bn, which is a 153% year-on-year increase. GAAP net profit of $597 million from a GAAP net loss of $2.0 billion in the fourth quarter 2013. 2014 net profit excluding net special charges came in at a record $4.2bn, up 115% year on year. For full year 2014, GAAP net profit was $2.9 billion, compared to a full year 2013 GAAP net loss of $1.8 billion for AMR Corporation. Both sets of figures includes the results for US Airways only for the period from the completion of the merger on December 9, 2013 through to December 31, 2013.

Comparing year-over-year results for American Airlines and US Airways excluding special charges and on a combined basis, the company’s fourth quarter 2014 net profit excluding net special charges was a record $1.1bn, or $1.52 per diluted share. This represents a 153% improvement over the combined non-GAAP net profit of $436m excluding net special charges for the same period in 2013. The company’s fourth quarter 2014 pre-tax margin excluding net special charges was a record 10.6%.

Excluding net special charges, AAL’s 2014 net profit was a record $4.2 billion, or $5.70 per diluted share. This represents a 115% improvement over the company’s combined 2013 non-GAAP net profit excluding net special charges of $1.9 billion.

“Our record 2014 results close out a fantastic first year for our merger. These results would not have been possible without the efforts of our more than 100,000 team members,” said Doug Parker, American Airlines Group Chairman and CEO. “We have much to do in the year ahead as we continue to integrate two large carriers. The results we have achieved thus far, combined with our economic outlook, give us confidence that 2015 will be another outstanding year for American Airlines.”

Total revenue in the fourth quarter was a record $10.2 billion, an increase of 2.1% versus the fourth quarter 2013 on a combined basis and excluding special items, on a 1.7% increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was 13.50 cents, down 1% versus the fourth quarter 2013 on a combined basis. Consolidated passenger yield was a record 16.84 cents, up 0.9% year-over-year.

Strong demand throughout the year led to 2014 total revenue of $42.7 billion, up 5.6% versus 2013 on a combined basis and excluding special items. Full year consolidated PRASM was 13.97 cents, up 2.2% versus 2013 on a combined basis.

Total operating expenses in the fourth quarter were $9.3bn, a decrease of 4.1% compared to combined fourth quarter 2013 due primarily to a 17.3% decrease in consolidated fuel expense. Fourth quarter mainline cost per available seat mile (CASM) was 13.32 cents, down 6.1% on a 1.5% increase in mainline ASMs versus combined fourth quarter 2013. Excluding special charges and fuel, mainline CASM was 8.67 cents, up 1.1% compared to the combined fourth quarter 2013. Regional CASM excluding special charges and fuel was 15.87 cents, up 0.9% on a 3.8% increase in regional ASMs versus combined fourth quarter 2013.

For the full year 2014, total operating expenses were $38.4bn, up 1.5% versus combined 2013. Excluding special charges and fuel, mainline CASM increased 2.0% to 8.63 cents versus combined 2013. Regional CASM excluding special items and fuel increased 3.6% to 15.94 cents versus combined 2013.

At December 31, 2014, American had approximately $8.1bn in total cash and short-term investments, of which $774m was restricted. The airline group also had an undrawn revolving credit facility of $1.8 billion.

Also in the fourth quarter, AAL returned $959m to its shareholders through the payment of $72m in quarterly dividends and the repurchase of $887m of common stock, or 20.5 million shares. When combined with the $113 million of shares repurchased in the third quarter 2014, AAL repurchased a total of 23.4 million shares at an average price of $42.72 per share in 2014.

AAL’s $1bn share repurchase program announced in July 2014 is now complete more than one year ahead of its scheduled expiration. AAL has also purchased approximately 52,000 shares from its Disputed Claims Reserve at the prevailing market price to satisfy certain tax obligations resulting from the November 4, 2014, distribution.

As of December 31, 2014, approximately $656 million of AAL’s unrestricted cash and short-term investment balance was held in Venezuelan bolivars. This balance includes approximately $621 million valued at 6.3 bolivars and approximately $35 million valued at 12.0 bolivars, with the rate depending on the date AAL submitted its repatriation request to the Venezuelan government.  AAL’s cash balance held in Venezuelan bolivars decreased $65m from the September 30, 2014 balance of $721m. In the fourth quarter of 2014, AAL incurred an $11m foreign currency loss related to the receipt of $23m at a rate of 6.3 bolivars to the dollar for one of its 2012 repatriation requests originally valued at a rate of 4.3 bolivars to the dollar. Accordingly, AAL revalued its remaining pending 2012 repatriation requests from 4.3 to 6.3 bolivars to the dollar resulting in additional foreign currency losses of $19m. In total, AAL recognized a $30m special charge for these foreign currency losses in the fourth quarter of 2014.

AAL has significantly reduced capacity in this market and it states that it is continuing to work with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency. “The Company is monitoring this situation closely and continues to evaluate its holdings of Venezuelan bolivars for additional foreign currency losses, which could be material,” the airline stated.

In the fourth quarter, AAL recognized $507 million in net special charges, including: $280 million in merger integration related expenses / $116 million in net charges for bankruptcy related items, principally consisting of fair value adjustments for bankruptcy settlement obligations / $70 million in charges related primarily to certain asset impairments / $31 million in non-operating special items primarily relating to a $30 million special charge for foreign currency losses relating to the Company’s cash balance held in Venezuelan bolivars / $16 million in net regional operating special items including a $24 million charge relating to a new pilot contract, partially offset by an $8 million gain on the sale of certain spare parts / $6 million in non-cash deferred income tax benefits relating to certain indefinite lived intangible assets.

AAL has announced that its Board of Directors declared a dividend of $0.10 per share for shareholders of record as of February 9, 2015. The dividend will be paid on February 23, 2015. In addition, the Company announced that its Board also authorized an additional $2 billion share repurchase program to be completed by the end of 2016.

Meanwhile, Abdalla Salem el-Badri, secretary general of the Organisation of Petroleum Exporting Countries, has commented that OPEC has to keep production high to protect against future high oil prices.

“If we cut production then there will be spare capacity and producers will not invest, or postpone projects. The market will rebound back higher that the $147 we saw in 2008,” he said.

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By TESTCustomwebLP TESTCustomwebLP January 27, 2015 21:14