What a year! American breaks all records

Dino D'Amore
By Dino D'Amore January 29, 2016 21:50

What a year! American breaks all records

We are but 29 days into 2016 but already the order confirmations are racking up for the manufacturers with ANA today confirming the three A380 order we reported on back in December. ANA will take delivery from 2019 and will have Rolls Royce Trent 900s on wing. The Iranian order for Airbus aircraft has smashed expectations with the order signed now for 21 A320ceos, 24 A320neos, 27 A330ceos, 18 A330-900 neos, 16 A350-1000s and 12 A380s for Iran Air. This more or less totally sorts out all of Airbus’s near term order book gaps. So one assumes the guys in Toulouse will be hitting the slopes sometime soon with very big grins indeed. Boeing has had a great year thus far too and one hopes that this will get better still in the very near future. But the goings on at the manufacturers is being over shadowed by the amazing US airline sector – both JetBlue and Allegiant figures are truly outstanding but American Airlines Group (AAL) continues to surprise many with its strength.

American has posted the highest full-year profit in the history of the airline industry. For the fourth quarter, American reported profit of $1.3bn taking the full year net profit to $6.3 billion or an impressive $9.12 a share. That figure is “more than American has ever made in its history, and indeed represents the highest profits of any airline in our industry’s history,” stated CEO Doug Parker in a company letter today.

Although American has had a great year and has seen costs tumble, mainly due to fuel, we should not lose sight of the fourth quarter data. During the fourth quarter American saw passenger revenue per available seat mile (PRASM) fall 6% to 12.69 cents, while fourth quarter consolidated passenger yield was 15.34 cents, down 8.9% year on year. In the US market, the continued weakness of ticket prices showed through with a fall of 4.5% in PRASM. The Latin American market continues to contract rapidly for all airlines and American saw PRASM fall by 16.9% in the region for the fourth quarter as it tried to hold on to market share, but also the airline saw PRASM fall 9.7% in the Pacific. Most worrying for investors will be the 7.4% fall in PRASM on the key Trans-Atlantic market.

There is no doubt that the fleet managers at American have done a fine job over the past year or so and have without doubt kept capacity growth at a near perfect pace.

During the fourth quarter total operating expenses fell 7.9% year on year to $8.6 billion on the back of a huge 40.8% fall in consolidated fuel expense year on year. Fourth quarter mainline cost per available seat mile (CASM) was 12.24 cents, down 8.1% year on year on the back of a 0.5% increase in mainline ASMs year on year for the fourth quarter. Full year operating expenses were $34.8 billion, down 9.4% year on year. Excluding net special charges and fuel, mainline CASM was 8.99 cents, up 4.2% year on year. Regional CASM excluding net special charges and fuel increased 0.9% year on year to 16.09 cents.

American purchased 25.6 million shares during the fourth quarter for $1.1 billion, bringing its full-year buyback total to $3.6 billion for 85.1 million shares. It also invested $5.3 billion in new aircraft during the year and over 12,000 new employees were added to the payroll. The airline is in great shape. American will pay a dividend of 10 cents a share on Feb. 24. Shares were up 52 cents to $38.66 this morning at the open.

Dino D'Amore
By Dino D'Amore January 29, 2016 21:50