American Airlines Group Inc. (NASDAQ:AAL) today reported its first quarter 2016 results. The Company’s first quarter highlights include:
- Reported first quarter 2016 pre-tax profit of $1.2 billion excluding special items, and net profit of $765 million excluding special items
- First quarter 2016 adjusted earnings per diluted share rose 15 percent vs. the first quarter 2015, to $1.991
- Instituted a new employee profit sharing program that will pay 5 percent of pre-tax profit, excluding special items
- Returned more than $1.6 billion to stockholders through share repurchases and dividends. The Company also authorized a new $2.0 billion share repurchase program that will expire at the end of 2017.
American Airlines Group’s first quarter 2016 pre-tax margin excluding special items was 12.9 percent, a record for the Company’s first quarter.
As a result of the reversal of the valuation allowance on the Company’s deferred tax assets at December 31, 2015, the Company’s 2016 results include a provision for income taxes at an effective rate of approximately 38 percent, which is substantially all non-cash due to net operating loss utilization. There was no tax provision for federal income taxes recorded in 2015.
Net profit excluding special items was $765 million, or $1.25 per diluted share. This compares to a net profit excluding special items for the 2015 first quarter of $1.2 billion, or $1.73 per diluted share. The 2016 first quarter net profit excluding special items included a provision for income taxes of $456 million, of which $453 million was non-cash.
On a GAAP (Generally Accepted Accounting Principles) basis, the Company reported a net profit of $700 million, or $1.14 per diluted share. This compares to a GAAP net profit of $932 million in the first quarter 2015, or $1.30 per diluted share. The first quarter net profit included a provision for income taxes of $417 million, of which $414 million was non-cash.
“We are pleased to report a first quarter pre-tax profit of $1.2 billion, excluding special items, and a 15 percent improvement in adjusted earnings per share,” said Doug Parker, American Airlines Chairman and CEO. “These results include a $73 million accrual related to the system-wide profit sharing plan we announced earlier this quarter. The people of American are doing an outstanding job of taking care of our customers and are the key to our future success.”
Revenue and Cost Comparisons
First quarter 2016 revenue was negatively impacted by competitive capacity growth, continued macroeconomic softness in Latin America, and foreign currency weakness. Total revenue in the first quarter was $9.4 billion, a decrease of 4.0 percent versus the first quarter 2015 on a 3.6 percent increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was 12.43 cents, down 7.5 percent versus the first quarter 2015. Consolidated passenger yield was 15.62 cents, down 7.1 percent year-over-year.
Total operating expenses in the first quarter were $8.1 billion, a decrease of 5.9 percent compared to the first quarter 2015 due primarily to a 32.7 percent decrease in consolidated fuel expense. First quarter mainline cost per available seat mile (CASM) was 11.58 cents, down 9.5 percent on a 3.1 percent increase in mainline ASMs versus the first quarter 2015. Excluding special items and fuel, mainline CASM was 9.62 cents, up 1.4 percent compared to the first quarter 2015. Regional CASM excluding net special items and fuel was 16.11 cents, down 2.2 percent on an 8.1 percent increase in regional ASMs versus the first quarter 2015. The first quarter expenses include a $73 million accrual related to the Company’s recently announced profit sharing program.
Cash and Investments
As of March 31, 2016, the Company had approximately $9.4 billion in total available liquidity, consisting of unrestricted cash and investments of $6.9 billion and $2.4 billion in undrawn revolver capacity. The Company also had a restricted cash position of $691 million.
As part of its ongoing $3.0 billion commitment to improving the customer experience, the Company continues to make product investments, including projects to enhance airport boarding areas, the Admirals Club and Flagship Lounges, in-flight connectivity, and improvements to the premium cabin.
In addition, the Company invested $1.3 billion in new aircraft during the first quarter, including 15 new mainline and 13 new regional aircraft, while retiring 22 aircraft. American has the youngest fleet of the U.S. network airlines and, over the next year, expects the average age of its mainline fleet to fall below 10 years.
Also in the first quarter, the Company returned more than $1.6 billion to its stockholders through the payment of $61 million in quarterly dividends and the repurchase of $1.6 billion of common stock, or 39.3 million shares, at an average price of $39.76 per share. In aggregate, the Company has returned approximately $6.6 billion to stockholders through share repurchases and dividends since it began its capital return program in mid-2014.
The Company’s Board of Directors has authorized a new $2.0 billion share repurchase program that will expire at the end of 2017. Since the Company began its capital return program, the Company’s Board of Directors has authorized a total of $9.0 billion of share repurchases.
Shares repurchased under the buyback programs may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors. The programs do not obligate the Company to repurchase any specific number of shares or continue a dividend for any fixed period, and may be suspended at any time at the Company’s discretion.
The Company also declared a dividend of $0.10 per share to be paid on May 18, 2016, to stockholders of record as of May 4, 2016.