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American Airlines: Earnings "highest ever for any carrier"

Jan 30, 2016

FORT WORTH, TX – American Airlines reported a record profit for the fourth quarter and all of 2015 as a sharp drop in fuel prices more than offset lower revenue.

The world’s biggest airline said that its earnings were the highest ever for any carrier. American is poised for another big year: airline officials said they expect to save another $2 billion on fuel in 2016.

American executives said the outbreak of the Zika virus and a government warning to pregnant women about traveling to Latin America and the Caribbean seemed to be having no effect on their business.

Like other airlines, American says it will give refunds or rebook pregnant women who were planning trips to areas affected by the virus, which has been linked to birth defects in Brazil. American officials said they didn’t know how many customers have asked for refunds, but airline president Scott Kirby said “it has not been a meaningful number.”

Kirby said that because the mosquito-borne virus is not transmitted through the air on planes, he didn’t expect it to be as damaging to the airline industry as past outbreaks such as the respiratory disease SARS in 2003.

CEO Doug Parker added that Zika “only has an impact on pregnant women, not the entire traveling public.”

The comments from Kirby and Parker echoed those of a JetBlue executive, who said Thursday that his airline did not see a measurable effect on trip bookings or refunds.

American Airlines Group Inc. posted net income of $3.28 billion in the fourth quarter, but the results were inflated by a huge accounting gain from a tax item.

Without that and other one-time gains and losses, American said it earned $1.3 billion or $2 per share, compared with $1.1 billion, or $1.52 per share, a year earlier.

That was still a record and beat Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $1.96 per share, and 15 analysts surveyed by FactSet predicted $1.97 per share.

Revenue fell 5.2 percent to $9.63 billion, matching the FactSet forecast.

But American more than offset the $530 million decline in revenue with savings of nearly $1.1 billion – 41 percent – on jet fuel. The steep drop in oil prices since mid-2014 has been a boon to airlines. They have passed some of the savings on to consumers in lower fares but kept much of it.

For all of 2015, American earned a record $7.6 billion. Even excluding the tax gain, adjusted profit was $6.3 billion, also a record. Parker, the CEO, said it was more than any airline had ever earned.

If there was any worrisome note in the report for American’s employees and investors – but welcome news for passengers – it was further evidence that airfares are falling.

American did not disclose its average fare. However, in the fourth quarter, passengers flew 3.8 percent more miles than a year earlier but paid 8.9 percent less per mile, a sign of lower prices. Investors prefer to look at how much passengers pay for every seat flown one mile – that accounts for unsold seats – and that figure also fell by 6 percent.

The fourth-quarter and 2015 net income included a $3 billion credit because American reversed a tax-valuation now that it is making money after huge losses in earlier years. Delta and United have made the same accounting change. With or without the tax credit, 2015 was a record year for American.

Shares of Fort Worth-based American fell 63 cents, or 1.7 percent, to $37.51 in morning trading. The shares began the day down nearly 10 percent since the beginning of the year and 25 percent in the last 12 months.

American Airlines: Earnings "highest ever for any carrier"

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