American Airlines Group Inc (NASDAQ:AAL) reported its fourth quarter and full year 2015 results.
American Airlines Group reported a record fourth quarter GAAP net profit of $3.3 billion, or $5.09 per diluted share, which includes a$3.0 billion net special credit resulting from the reversal of the Company’s tax valuation allowance. This compares to a GAAP net profit of $597 million in the fourth quarter of 2014, or $0.82 per diluted share.
For full year 2015, the Company reported a record GAAP net profit of $7.6 billion, or $11.07 per diluted share, compared to a GAAP net profit of $2.9 billion, or $3.93 per diluted share in 2014.
American Airlines Group’s fourth quarter 2015 net profit, excluding net special credits, was a record $1.3 billion, or $2.00 per diluted share versus a fourth quarter 2014 net profit excluding net special charges of $1.1 billion, or $1.52 per diluted share. The Company’s fourth quarter 2015 pretax margin excluding net special credits was a record 13.4 percent, up 2.8 percentage points from the same period last year.
Excluding net special credits, the Company’s 2015 net profit was a record $6.3 billion, or $9.12 per diluted share. This represents a 50 percent improvement over the Company’s 2014 net profit excluding special charges of $4.2 billion, or $5.70 per diluted share. The Company’s 2015 pretax margin excluding net special credits was a record 15.3 percent, up 5.5 percentage points versus 2014.
See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of GAAP to non-GAAP financial information.
“We are extremely pleased to report record quarterly and full year earnings,” said Chairman and CEO Doug Parker. “The credit for these results goes to our outstanding team members, who have provided excellent customer service.
“American Airlines enters 2016 well-positioned for the future. With the youngest aircraft fleet among our major competitors, more than$2 billion of product investments underway, and the best aviation professionals in the business, we are well on our way to restoring American as the greatest airline in the world.”
Revenue and Cost Comparisons
Total revenue in the fourth quarter was $9.6 billion, a decrease of 5.2 percent versus the fourth quarter 2014 on a 0.6 percent increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was 12.69 cents, down 6.0 percent versus the fourth quarter 2014. Fourth quarter consolidated passenger yield was 15.34 cents, down 8.9 percent versus the prior year.
For the full year 2015, total revenue was $41.0 billion, down 3.9 percent versus 2014 on a 1.2 percent increase in total ASMs. Driven by a 6.5 percent decrease in consolidated passenger yield, 2015 consolidated PRASM was down 5.4 percent to 13.21 cents versus the prior year.
Total operating expenses in the fourth quarter were $8.6 billion, a decrease of 7.9 percent compared to the fourth quarter 2014, due primarily to a 40.8 percent decrease in consolidated fuel expense. Fourth quarter mainline cost per available seat mile (CASM) was12.24 cents, down 8.1 percent on a 0.5 percent increase in mainline ASMs versus the fourth quarter 2014. Excluding net special charges and fuel, mainline CASM was 9.22 cents, up 6.3 percent compared to the fourth quarter 2014. Regional CASM excluding net special charges and fuel was 16.10 cents, up 1.5 percent on a 1.4 percent increase in regional ASMs versus the fourth quarter 2014.
Full year 2015 total operating expenses were $34.8 billion, down 9.4 percent versus 2014. Excluding net special charges and fuel, mainline CASM was 8.99 cents, up 4.2 percent versus 2014. Regional CASM excluding net special charges and fuel increased 0.9 percent to 16.09 cents versus 2014.
Cash and Investments
As of Dec. 31, 2015, the Company had $6.9 billion in total cash and short term investments, of which $695 million was restricted (the foregoing amounts are after giving effect to the write-off of Venezuelan bolivars described in the special items section below). The Company also had an undrawn revolving credit facility of $2.4 billion.
As part of an extensive and unprecedented fleet renewal program, the Company invested more than $5.3 billion in new aircraft in 2015, providing it with the youngest and most modern fleet of the U.S. network airlines. In 2015, the Company took delivery of 75 new mainline aircraft, added 52 regional aircraft, and removed 112 mainline and 31 regional aircraft. In 2016, the Company expects to take delivery of 55 new mainline aircraft, add 49 regional aircraft and remove 92 mainline and 29 regional aircraft.
In the fourth quarter, the Company returned $1.2 billion to its shareholders through the payment of $72 million in quarterly dividends and the repurchase of $1.1 billion of common stock, or 25.6 million shares. When combined with the dividends and shares repurchased during the first three quarters of 2015, the Company returned $3.9 billion to its shareholders in 2015 and reduced its shares outstanding by repurchasing 85.1 million shares for $3.6 billion. In addition, in 2015 the Company elected to pay approximately $306 million to cover employee tax withholding obligations on equity awards, further reducing the share count by 7.0 million.
The Company also declared a dividend of $0.10 per share to be paid on Feb. 24, 2016, to shareholders of record as of Feb. 10, 2016.
2015 Notable Accomplishments
- Adopted a single reservations system with zero customer disruption
- Reached ratified contracts with industry-leading pay rates for pilots, flight attendants, and customer service and reservation agents
- Received a single operating certificate from the Federal Aviation Administration, meaning American is regulated as one airline
- Merged American Airlines Vacations and US Airways Vacations
- Merged frequent flyer programs by moving US Airways Dividend Miles members into AAdvantage®
- Opened the new state-of-the-art Robert W. Baker Integrated Operations Center in Fort Worth
- Announced plans to expand the airline’s Fort Worth campus so that support staff and leadership team members work alongside the airline’s training and integrated operations support teams
- Optimized the airline’s flight schedules at Chicago O’Hare International Airport and Dallas Fort Worth International Airport
- Expanded bag tracking technology to the whole airline, enabling customers to track checked baggage in real time
- Brought the number of airports with co-located operations to 140, and consolidated all mainline operations at Dallas Fort Worth International Airport into three terminals, gaining efficiencies in gate use and line maintenance
Finance, Network and Marketing Accomplishments
- Announced changes to the AAdvantage® program that become effective throughout 2016. Award miles will be based on dollars spent instead of distance flown
- The Company’s stock was added to the S&P 500 index
- Expanded the airline’s global footprint by adding 35 new routes, including 6 domestic and 19 international. Notable new routes include Dallas-Fort Worth to Beijing, Los Angeles to Sydney and Los Angeles to Mexico City
- For the fourth consecutive year, the American Airlines AAdvantage® program was named Program of the Year at the 2015 Freddie Awards, one of the most prestigious honors for loyalty programs in the travel industry. American also took home honors for Best Elite Program
- Recognized by Air Cargo News as the Cargo Airline of the Year for 2015. This is the first time an airline in the Americas has won the award in its 32-year history. The Company was also named the Best Cargo Airline of the Americas for the eighth consecutive year
- Opened a new 25,000-square foot dedicated pharmaceutical cargo cold storage facility in Philadelphia
- Introduced the Boeing 787 Dreamliner to the Company’s fleet. At year end, the Company had received 13 of these aircraft out of its order of 42
- Provided charter service for Pope Francis’ first official visit to the U.S.
- Expanded the Company’s agreement with Alaska Airlines that allows full access of American’s network to Alaska customers as well as reciprocal airport club access
- Signed a codeshare agreement with Korean Air to place its code on American flights between Dallas Fort Worth International Airportand Seoul, South Korea
- Became the official airline partner of the Los Angeles Clippers and was named the official airline of the Chicago Cubs and Wrigley Field
Community Relations Accomplishments
- Hosted Sky Ball XIII at the airline’s DFW hangar. This annual fundraiser benefits the nation’s active, reserve and retired military. Approximately 1,000 American Airlines employee volunteers supported the 2015 event, which raised a record $2.2 million
- American received, for the 14th consecutive year, the highest possible ranking by the Human Rights Campaign in the 2016 Corporate Equality Index, a nationally recognized benchmark of America’s top workplaces for inclusion of LGBT employees
- American’s Be Pink campaign raised $1.8 million in cash and frequent flyer mile donations for Susan G. Komen, which raises money to fight breast cancer, and the American Cancer Society
- The Environmental Protection Agency announced American is now ranked 43rd on their Fortune 500 list of the largest green power users
- Recognized four employees with the 2015 Earl G. Graves Award for Leadership in Diversity and Inclusion for their work in making a lasting impression in the workplace, in the community and as role models in diversity
- Awarded $565,000 in college scholarships to 210 dependents of employees through the American Airlines Education Foundation, including 40 for first-generation college attendees
- Launched Fuel Smart, a company-wide fuel saving program to reduce usage of aircraft auxiliary power units when jets are parked on the ground; a portion of the savings generated by this reduced usage will benefit Air Compassion for Veterans, a nonprofit organization providing air transportation to injured veterans and active duty military traveling for medical, rehabilitation, or other veteran-related purposes
- In 2015, American Airlines employees participated in more than 11,600 volunteer events in their communities, contributing more than 77,000 hours of volunteer time in the communities where they live and where American provides service. In addition, as part of the Company’s Flights for 50 awards program, American employees donated more than 6.4 million frequent flier miles to nonprofit organizations in their communities
In the fourth quarter, the Company recognized approximately $2.0 billion in net special credits, including:
- $450 million of operating special charges primarily related to merger integration expenses
- $592 million nonoperating special charge related to a write-off of the value of Venezuelan bolivars held by the Company
- $3.0 billion special non-cash benefit related to the reversal of the Company’s tax valuation allowance. (Original Source)
Shares of American Airline closed yesterday at $38.14. AAL has a 1-year high of $56.05 and a 1-year low of $34.10. The stock’s 50-day moving average is $41.27 and its 200-day moving average is $41.97.
On the ratings front, American Airlines has been the subject of a number of recent research reports. In a report issued on January 27, UBS analyst Darryl Genovesi upgraded AAL to Buy, with a price target of $46, which represents a potential upside of 20.6% from where the stock is currently trading. Separately, on January 20, Sterne Agee CRT’s Michael Derchin maintained a Buy rating on the stock and has a price target of $52.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Darryl Genovesi and Michael Derchin have a total average return of 10.9% and 26.6% respectively. Genovesi has a success rate of 53.8% and is ranked #684 out of 3594 analysts, while Derchin has a success rate of 74.4% and is ranked #18.
The street is mostly Bullish on AAL stock. Out of 6 analysts who cover the stock, 5 suggest a Buy rating and one recommends to Hold the stock. The 12-month average price target assigned to the stock is $51.00, which implies an upside of 33.7% from current levels.
American Airlines Group Inc, through its subsidiaries, operates in the airline industry. The Company has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix and Washington, D.C.