Thursday, 24 January 2019

American Airlines 2018 and fourth quarter results are now in.......

The giant US air carrier, American Airlines reported its fourth-quarter and full-year 2018 results, including these highlights:

Reported a fourth-quarter 2018 pre-tax profit of $387 million, or $634 million excluding net special items1, and a fourth-quarter net profit of $319 million, or $481 million excluding net special items1,3
Reported a full-year 2018 pre-tax profit of $1.9 billion, or $2.8 billion excluding net special items2, and a full-year net profit of $1.4 billion, or $2.1 billion excluding net special items2,3
Fourth-quarter earnings were $0.69 per diluted share, or $1.04 per diluted share excluding net special items. Full-year 2018 earnings were $3.03 per diluted share, or $4.55 per diluted share excluding net special items.
Accrued $175 million for the company’s profit sharing program in 2018, including $40 million in the fourth quarter
Returned $986 million to shareholders in the form of dividends and share repurchases in 2018

“We thank our team for taking care of our customers during the busy holiday travel period. Their efforts led to significant improvements in key operational metrics and great customer service. We also completed a number of important merger integration projects that will serve us well in the future,” Chairman and CEO Doug Parker said.

“We enter 2019 with great momentum. We are intent upon running the most reliable operation in our post-merger history, pursuing high margin growth opportunities at our most profitable hubs, and executing on a number of valuable revenue and cost-saving initiatives. We expect our total revenue per available seat mile to grow faster than our network competitors, and to deliver strong pre-tax earnings growth in 2019. At the midpoint of our guidance, 2019 diluted earnings per share excluding special items would increase approximately 40 percent versus 2018.”   

Continued strength in passenger demand and record passenger yield drove a 3.1% year-over-year increase in fourth-quarter 2018 total revenue, to a record $10.9 billion. Driven by a 2.4% increase in passenger yield, passenger revenue per available seat mile (PRASM) grew 1.4 % to 14.59 cents. Cargo revenue was up 3.0 % to $264 million due to a 9.1% increase in yield. Other revenue was up 6.3% to $712 million due primarily to higher loyalty revenue. Fourth-quarter total revenue per available seat mile (TRASM) increased by 1.7% compared to the fourth quarter of 2017 on a 1.4 % increase in total available seat miles.

Total fourth-quarter 2018 operating expenses were $10.4 billion, up 4.2 % year-over-year, driven by a 19.6 % increase in consolidated fuel expense. Had fuel prices remained unchanged versus the fourth quarter of 2017, total fourth-quarter 2018 expenses would have been approximately $367 million lower. Total fourth-quarter 2018 cost per available seat mile (CASM) was 15.21 cents, up 2.7 % from fourth quarter 2017. Excluding fuel and special items, consolidated fourth-quarter CASM was 11.32 cents, down 0.2 % year-over-year.

Strategic Objectives
American’s long-term success is guided and measured by strategic objectives that ensure a healthy, competitive company for the long term: to create a world-class customer experience, make culture a competitive advantage, and build American Airlines to thrive forever by thinking forward and ensuring a strong financial foundation.

Create a World-Class Customer Experience
American has invested more than $25 billion in its team, product and fleet over the past five years – the largest investment of any carrier in commercial aviation history in such a short time. American continues to make large strides in delivering a world-class experience for its customers. In 2018, American:

Activated free live TV, now on 270 aircraft. American continues to be the only U.S. carrier to offer live TV on international flights
Expanded high-speed Wi-Fi, now on 570 aircraft, allowing customers to stream movies and TV shows. The rest of American’s long-term narrowbody aircraft will receive high-speed Wi-Fi in 2019
Launched service on 86 new routes including 14 new destinations, such as Reykjavik, Iceland; Budapest, Hungary; and Prague, Czech Republic. In 2019, American will become the only U.S. carrier to travel nonstop to Bologna, Italy and Dubrovnik, Croatia
Continued to deliver on its product segmentation strategy, expanding Basic Economy to Europe and adding Premium Economy to 103 aircraft. American offers Premium Economy on more aircraft than any other U.S. airline
Ordered 47 new Boeing 787s to replace retiring aircraft and keep American’s fleet the youngest among U.S. network airlines
Continued to offer a great premium experience on the ground and in the air, including renovating Admirals Club lounges in Miami and Dallas-Fort Worth. In 2019, American will open newly-renovated Admirals Club lounges in Boston, Charlotte and Pittsburgh, as well as a new, world-class premium Flagship Lounge and Flagship First Dining in Dallas-Fort Worth
Make Culture a Competitive Advantage
Taking care of team members translates into better customer care. American’s culture reflects its emphasis on providing the right tools, training and care for its frontline team members. In 2018, American:

Started the year by awarding team members $1,000 each as a result of the 2017 Tax Cuts and Jobs Act
Gave team members the opportunity to travel across American’s global network with two free round-trip tickets for the airline being named Air Transport World’s 2017 Airline of the Year
Completed flight attendant operational integration, allowing flight attendants to fully intermix across the entire fleet. This integration creates improved scheduling options for flight attendants and the airline and provides greater flexibility and service recovery during irregular operations
Supported the victims of the deadly California wildfires, as American team members conducted one of the airline’s largest disaster relief efforts by assembling 20,000 American Red Cross hygiene kits at its Phoenix cargo facility
Donated more than $35 million in cash and travel value across the globe in support of military and veteran’s initiatives, health research, disaster response and children’s well-being
Awarded $11 million in cash and recognition points through programs that recognize team members for good work supporting customers and colleagues
Build American Airlines to Thrive Forever
American is building a company that we expect to be consistently profitable today and in the future, making decisions to ensure it is financially strong and forward-thinking. In 2018, American:

Returned $986 million to shareholders in the form of dividends and share repurchases in 2018
Reported the best year ever at American Airlines Cargo, with a record $1 billion in revenue and 2 billion pounds of freight delivered
Ended 2018 with approximately $7.6 billion in total available liquidity, comprised of unrestricted cash and investments of $4.8 billion and $2.8 billion in undrawn revolver capacity. The company also had a restricted cash position of $154 million
Instituted the One Airline initiative, producing more than $300 million of cost savings in 2018. The One Airline initiative is designed to drive efficiencies and improve margins through simplifying the operation, improving staffing processes, centralizing internal workflows, and optimizing technology resources
Invested $3.7 billion in new aircraft, facilities upgrades for customers and team members, continuous integration, and fleet modifications including the narrowbody retrofit program, high-speed Wi-Fi and Premium Economy
Broke ground on a $1.6 billion modernization project at Terminals 4 and 5 at Los Angeles International Airport, in partnership with Los Angeles World Airports
Unveiled the first new section of Terminal B at LaGuardia. The new concourse includes world-class technology, innovation, and best-in-class amenities. American now occupies three of the 11 gates in the new concourse
Was named No. 69, ahead of all other commercial airlines, on The Wall Street Journal’s Management Top 250 list
Launched a one-step facial recognition program at Los Angeles Terminal 4, which offers an easier airport experience for customers on select international departures
2019 Focus

In 2019, American is focused on growing revenue, implementing cost improvements and running the most reliable operation in its post-merger history.

Extensive revenue initiatives – American expects to achieve $1 billion of revenue improvements in 2019 as it benefits from network optimization, merchandising and product segmentation. American leads the industry in Premium Economy, with the product on more aircraft than any other U.S. carrier. Premium Economy will be expanded to American’s full long-term widebody fleet by mid-2019. American will also add a total of 19 new gates at its Dallas-Fort Worth and Charlotte hubs, creating significant new revenue opportunities
Significant cost improvements – American’s 2019 initiatives are expected to produce more than $300 million of cost savings compared to 2018 by eliminating post-merger cost redundancies, leveraging technology efficiencies, and implementing changes to network strategy
Improve operational reliability – The airline is intensely focused on operational reliability, with efforts specifically targeting on-time departures, turn times and aircraft out of service
Quarterly Dividend
American declared a dividend of $0.10 per share to be paid on Feb. 20, 2019, to stockholders of record as of Feb. 6, 2019.

Guidance and Investor Update
American expects its first-quarter 2019 TRASM to be flat to up approximately 2.0 % year-over-year. The company also expects its first-quarter 2019 pre-tax margin excluding net special items to be between 2.5 and 4.5%.4 Based on today’s guidance, American expects its 2019 diluted earnings per share excluding net special items to be between $5.50 and $7.50.4

For additional financial forecasting detail, please refer to the company’s investor update, filed with this release with the SEC on Form 8-K. This filing will be available at

Early Adoption of Lease Accounting Standard
In the fourth quarter of 2018, the company elected to adopt Accounting Standards Update 2016-02: Leases (Topic 842) (the New Lease Standard) as of Jan. 1, 2018. The New Lease Standard requires leases to be recognized on the balance sheet as liabilities with corresponding right-of-use assets. The company’s early adoption resulted in the recognition on the balance sheet of approximately $10 billion of lease liabilities with corresponding right-of-use assets. Adopting the New Lease Standard in the fourth quarter of 2018, pre-tax income for the quarter decreased by $16 million. Excluding a $70 million mainline operating net special charge related to accelerated rent expense for aircraft grounded or expected to be grounded earlier than planned, adoption of the New Lease Standard increased pre-tax income excluding net special items for the fourth quarter of 2018 by $54 million. A significant portion of the adjustments recorded in the fourth quarter of 2018 to adopt the New Lease Standard relate to prior 2018 quarters. The company will recast 2018 quarters for the adoption of the New Lease Standard in its 2018 Form 10-K filing.

.(Images American Airlines)