Friday, 26 July 2019

American Airlines Group Reports Second Quarter 2019 Profit

The US mega-carrier American Airlines has this week reported its second-quarter 2019 results, including these highlights:

Reported a second quarter 2019 pre-tax profit of $882 million and net profit of $662 million. Excluding net special items, pre-tax profit and net profit rose more than 5% to $1.1 billion and $810 million,1 respectively.
Second quarter earnings were $1.49 per diluted share. Excluding net special items, earnings per share grew 10% year over year to $1.82 per diluted share1.
Reported record second quarter revenue of $12 billion. Also reported record second quarter total revenue per available seat mile (TRASM) — the 11th consecutive quarter of TRASM growth.
“Our team members did a tremendous job to deliver solid results despite a challenging start to our summer,” said Chairman and CEO Doug Parker. “Their extraordinary efforts led to an increase in earnings and record revenue performance, and we thank our team for their expertise and care for our customers.”

“These strong results in the face of near-term adversity, coupled with our ongoing initiatives, give us great confidence in the future of American Airlines.”

Continued strength in passenger demand drove a 2.7% year-over-year increase in second quarter 2019 total revenue to $12 billion, a record for the quarter. Driven by a record second quarter total passenger load factor of 86.6%, passenger revenue per available seat mile (PRASM) grew 4% to a record 15.22 cents. Cargo revenue decreased 15.4% to $221 million due primarily to a 16.2% decrease in cargo ton miles. Other revenue was up 2.9% to $728 million due primarily to higher revenue from the company’s loyalty program. Marking the 11th consecutive quarter of growth, second quarter TRASM increased by 3.5% to a record 16.54 cents on a 0.8% decrease in total available seat miles.
Total second quarter 2019 operating expenses were $10.8 billion, up 1.6% year over year. Total operating cost per available seat mile (CASM) was 14.94 cents in the second quarter of 2019, up 2.4% from second quarter 2018. Excluding fuel and special items, second quarter CASM was 11.34 cents, up 4.8% year over year, driven primarily by lower than planned capacity due to the Boeing 737 MAX grounding and operational disruptions related to an illegal work slowdown by our mechanics’ union in an effort to influence contract talks.

Fleet Update

On March 13, the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX aircraft. The American fleet currently includes 24 MAX aircraft with an additional 76 aircraft on order, of which seven were scheduled to be delivered in the second quarter. The company estimates that the cancellations in the second quarter negatively impacted pre-tax income by approximately $175 million.
The company has removed all MAX flying from its flight schedule through Nov. 2. With the flight cancellations extending an additional two months, the company now expects the MAX cancellations will negatively impact its full year 2019 pre-tax earnings by approximately $400 million.

Strategic Objectives

American’s success is guided by three strategic objectives: Create a world-class customer experience, make culture a competitive advantage and build American Airlines to thrive forever.

Create a world-class customer experience

American has invested more than $28 billion in its people, product and fleet over the past five years — the largest investment of any carrier in commercial aviation history. In the second quarter, American:
  • Continued to evolve American’s fleet by taking delivery of 14 new aircraft and operating its first customer flight on the Airbus A321neo, a fuel-efficient aircraft equipped with power at every seat, larger overhead bins and free wireless entertainment to each customer’s own device, including free live television.
  • Completed a two-year retrofit of Premium Economy, which offers more legroom, wider seats and enhanced meal service on long-haul international flights and select flights to Alaska and Hawaii. American also took the top spot for Premium Economy service in TripAdvisor’s Travelers’ Choice Awards, beating all other U.S. carriers.
  • Opened American’s Flagship Lounge and Flagship First Dining in Terminal D at Dallas Fort Worth International Airport (DFW) providing customers with quiet spaces to rest, luxury showers and a high-end, sit-down dining experience.
  • Launched DFW 900, the company’s strategic growth plan that involved the opening of the airline’s new Terminal E Satellite facility with 15 new gates and increased departures at its hub by more than 100 per day.
  • Debuted Bang & Olufsen noise-cancelling headsets for customers in first and business class.
  • The AAdvantage program was named Best Elite Program for the Americas at the Freddie Awards, for the eighth year in a row.
  • Unveiled the new Great Hall in Terminal B at Boston Logan International Airport (BOS), providing customers with a more comfortable airport experience, local flavor and innovative technology.

Make culture a competitive advantage

Taking care of team members translates into better customer care. We continue to invest in improved tools, training and support for team members and in the second quarter, American:
  • Recognized American’s Maintenance team through systemwide celebrations on Aviation Maintenance Technician Day and launched the new Ken MacTiernan Excellence in Aviation Maintenance Award.
  • Opened its 29th domestic Line Maintenance station at Houston’s George Bush Intercontinental Airport (IAH).
  • Cut the ribbon on a brand new Terminal 5 ticket counter and break room at Los Angeles International Airport (LAX), the first major milestone toward the completion of the $1.6 billion modernization project for Terminals 4 and 5.
  • Began moving team members to the expanded Robert L. Crandall Campus in Fort Worth, Texas.
  • Named among the Best-of-the-Best Corporations for Inclusion by the National Gay & Lesbian Chamber of Commerce for the fourth year in a row.
  • Contributed $858 million to American’s pension plans, bringing the 2019 contribution total to $1.2 billion — $436 million in excess of the required minimum contribution.
  • Awarded $976,000 in scholarships to 360 children of team members at a ceremony in Dallas as part of the American Airlines Education Foundation scholarship program.
  • Accrued $67 million for the company’s profit-sharing program, bringing the year-to-date accrual to $87 million.

Build American Airlines to thrive forever

With a nearly 100-year legacy, American is building a company that we expect to be consistently profitable today and in the future. This long-term initiative was furthered during the second quarter as American:
  • Launched 50 new routes, including new service to Dubrovnik, Croatia, and Berlin, Germany.
  • Awarded tentative approval from the U.S. Department of Transportation (DOT) for additional service to Tokyo’s Haneda (HND) from LAX and DFW, providing American’s customers better access to downtown Tokyo and to the domestic network of its Pacific Joint Business partner, Japan Airlines.
  • Received approval from the DOT of its joint business between American and Qantas, allowing for commercial integration between the carriers on routes between the U.S. and Australia and New Zealand.
  • Rolled out new technology initiatives for customers, including pre-paid bag functionality, automation to handle operationally driven overbooked flights and instant buy-up opportunities.
  • Agreed to purchase 50 Airbus A321XLR aircraft, the new longer-range version of the A321neo, with deliveries scheduled to begin in 2023. The agreement includes the conversion of 30 of American’s existing A321neo slots to A321XLRs and the exercise of options for an additional 20 A321XLRs.
  • Announced plans to develop a sixth terminal at DFW that could add up to 24 gates, with the first section of the terminal expected to open as soon as 2025. The plans also include investing in enhancements in Terminal C.

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