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Soaring Profits For Major U.S. Fliers

American Airlines Group, Inc. (AAL: Quote), Southwest Airlines Co. (LUV: Quote), and JetBlue Airways Corp. (JBLU: Quote) reported Thursday profits for the second quarter that grew sharply from last year.

American Airlines and Southwest Airlines topped analysts' expectations, while JetBlue matched estimates.

Operating revenues at all three companies were higher, with American Airlines and Southwest Airlines breezing past Street view, while JetBlue missed it.

In 2013, American Airlines emerged from bankruptcy and closed its $11 billion merger with US Airways Group, Inc. in early December to form the world's biggest airline under the name American Airlines Group.

Fort Worth, Texas-based American Airlines reported a record net profit of $864 million or $1.17 per share for the second quarter, sharply higher than $220 million or $0.79 per share in the prior-year quarter.

American Airlines' reported financial results for the year-ago quarter include the results for U.S. Airways prior to completion of the merger on December 9, 2013.

American Airlines noted that it was more meaningful to compare year-over-year results for American Airlines and US Airways on a combined basis, which includes the results of US Airways Group.

On a combined basis, net profit for the quarter grew to $864 million from last year's $507 million.

Excluding net special charges of $592 million, combined adjusted net profit for the quarter was $1.46 billion or $1.98 per share, a record for any quarter in the history of American Airlines, compared to $681 million in the year-ago quarter.

On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $1.95 per share for the quarter. Analysts' estimates typically exclude special items.

"We are very pleased to report the highest quarterly profit in the history of American Airlines. Our merger is off to a great start and our 100,000 team members are doing a wonderful job working together to take care of our customers," American Airlines Chairman and CEO Doug Parker said.

Total operating revenues for the quarter surged 76.1 percent to $11.36 billion from $6.45 billion last year.

On a combined basis, total revenues for the quarter were a record $11.36 billion, up 10.2 percent from $10.30 billion in the same quarter last year, and topped fifteen Wall Street analysts consensus estimate of $11.33 billion by a whisker.

Consolidated traffic, measured in revenue passenger miles or RPMs, improved 2.5 percent and consolidated capacity, measured in available seat miles or ASMs, increased 3.1 percent from last year. However, Consolidated passenger load factor edged down 0.5 percentage points. Consolidated operating expenses grew 7 percent to $10.0 billion from last year.

American Airlines also announced a capital deployment program, including over $2.8 billion in debt and aircraft lease prepayments, a $1 billion share repurchase program, the initiation of a quarterly cash dividend, and $600 million of additional pension contributions.

As part of the program, American's board of directors declared a cash dividend of $0.10 per share for shareholders of record as of August 4, 2014, the first dividend declared by American since 1980.

Dallas, Texas-based Southwest Airlines reported record net income of $465 million or $0.67 per share for the second quarter, higher than $224 million or $0.31 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was a record $485 million or $0.70 per share, compared to $274 million or $0.38 per share in the year-ago quarter.

Analysts polled by Thomson Reuters expected the company to report earnings of $0.62 per share for the quarter.

Total operating revenues for the quarter increased 7.9 percent to a record $5.01 billion from $4.64 billion in the same quarter last year, and topped fourteen Wall Street analysts' consensus estimate of $4.94 billion. Passenger revenues rose 8.5 percent from last year to $4.75 billion.

Gary Kelly, chairman, president, and CEO, stated, "We are very pleased with our strong second quarter earnings performance. Net income, excluding special items, of $485 million, or $.70 per diluted share, represents our fifth consecutive quarter of record profits. The successful execution of our strategic initiatives continues to contribute significantly to these record profit."

The company noted that operating unit revenues grew 8.41 percent, on a 0.4 percent decline in available seat miles and a 2.2 percent rise in average seats per trip from last year.

Traffic increased 2.4 percent to 28.59 billion, while capacity edged down 0.4 percent to 34.10 billion from last year. Load factor increased 2.3 percentage points to 83.9 percent from the year-ago quarter.

Total operating expenses increased 0.6 percent to $4.24 billion from last year, with fuel and oil expenses declining 4.3 percent from a year ago.

"We plan to fully convert AirTran's remaining international markets and domestic flying by the end of this year. We expect roughly flat 2014 available seat miles, year-over-year, and intend to expand the network in a disciplined manner. For 2015, we currently expect our available seat miles to increase, year-over-year, largely driven by a two to three percent growth in seats from the upgauging of our fleet, along with a higher percentage of our fleet in revenue service post-integration," Kelly added.

Meanwhile, New York's hometown airline JetBlue Airways reported net income of $230 million or $0.68 per share for the second quarter, sharply higher than $36 million or $0.11 per share in the prior-year quarter.

Excluding special items, adjusted net income for the latest-quarter was $61 million or $0.19 per share. Analysts expected the company to report earnings of $0.19 per share for the quarter.

Total operating revenues for the quarter grew 11.9 percent to $1.49 billion from $1.34 billion in the same quarter last year, but missed eleven Wall Street analysts' consensus estimate of $1.51 billion by a whisker.

Passenger revenues grew 12.4 percent to $1.37 billion, and other revenues increased 7.0 percent from last year.

Traffic for the quarter increased 5.7 percent to 9.63 billion, on a capacity growth of 6.0 percent to 11.39 billion, resulting in a load factor of 84.6 percent a decrease of 0.3 points from last year.

Operating expenses for the quarter grew 9.8 percent to $1.35 billion from last year, with aircraft fuel expenses growing 6.9 percent. Operating margin improved 180 basis points to 9.4 percent from last year.

Looking ahead to the third quarter, JetBlue projects CASM to increase between 0.5 and 2.5 percent, while excluding fuel and profit sharing, it is expected to increase between 1.0 and 3.0 percent. Capacity is expected to increase between 3.0 and 5.0 percent.

For fiscal 2014, the company expects CASM to rise between 1 and 3 percent, while, excluding fuel and profit sharing, it is expected to increase between 2.5 and 4.5 percent. Capacity is expected to increase between 4 and 6 percent.

Previously, the company had expected CASM to rise between 2 and 4 percent, while, excluding fuel and profit sharing, it was expected to increase between 3.5 and 5.5 percent.

In Thursday's regular trading session, AAL is currently trading at $43.65, up $0.32 or 0.74% on a volume of 8.77 million shares, and LUV is trading at $28.97, up $0.10 or 0.35% on a volume of 4.16 million shares, while JBLU is trading at $11.27, down $0.01 or 0.04% on a volume of 7.19 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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