American Airlines posts $480 million profit
04/24/2014 7:26 AM
04/25/2014 6:25 PM
Winter storms couldn’t stop the combined American Airlines and US Airways from posting a profit of $480 million in its first full quarter as a merged company, more than Wall Street expected.
“In the entire history of American Airlines, we have never earned $400 million in the first three months of a year, but in the first three months since the merger, we did,” Doug Parker, chief executive officer of Fort Worth-based American Airlines Group, said in a letter to employees.
Revenue was about $10 billion, up 5.6 percent from the carriers’ combined revenue in the first quarter of 2013. The airline increased capacity by 2 percent in the quarter as it received newer, larger planes while retiring older, less-fuel-efficient aircraft.
The severe winter weather reduced first-quarter revenue by $115 million and hurt operating profit by $60 million as the airline canceled 34,000 flights in the first three months of the year.
“This was the most difficult winter season that any of us have ever experienced in this business,” Parker said during a conference call with analysts.
The airline, which merged and exited Bankruptcy Court in December, also ended the quarter with $10.6 billion in cash and short-term investments, including $947 million in restricted cash.
Excluding one-time accounting items, the carrier reported a profit of $402 million, or 54 cents per share, beating Wall Street’s consensus estimate of 48 cents per share. One-time items included a $137 million credit primarily for the sale of its slots at Washington’s Reagan National Airport.
The Justice Department required American to divest takeoff and landing slots at Reagan Airport and at New York’s LaGuardia Airport to receive approval for its merger with US Airways. The carrier said it has received $381 million in cash from the sale of those slots.
Shares of American (ticker: AAL) closed up 17 cents to $37.26 on the Nasdaq exchange Thursday.
American President Scott Kirby confirmed that the airline is in final negotiations with a couple of regional carriers to fly new, larger Embraer 175 aircraft and will announce at some point who will fly them using the American Eagle brand. It will not be Envoy Air, the regional subsidiary owned by American that used to be called American Eagle, Kirby said.
“Envoy is still an important part of the airline,” Kirby said.
The integration of American and US Airways has been smooth, executives said, pointing to a successful Day One for customers in January when the airline unveiled code-sharing across its networks and later aligned award travel options and checked-baggage policies.
“We’ve had a really good start,” Kirby said, adding that “we haven’t done the hardest things yet, like the [passenger reservation] system cut-over.”
The carrier’s two legacy passenger reservation systems will likely be converted to the new system in 2015, executives said.
Separately, American and its flight attendants unions also started talks Thursday on a joint contract that will cover American and the former US Airways.
The flight attendants, to be represented by the Association of Professional Flight Attendants, submitted their opening proposal to management. With the start of negotiations, the parties will have 150 days to agree to a new contract. An arbitrator will decide any items that the parties cannot agree on.
“As the face of this airline, we will continue to work hard to make the company a success. Doug Parker knows that, and I feel confident that we’ll reach an agreement that recognizes the flight attendants’ contribution and commitment to the new American,” said Laura Glading, the union president.
The negotiating committee also includes members of the Association of Flight Attendants, which has represented US Airways attendants.
“The flight attendants at American Airlines deserve a record-breaking contract which reflects our contributions in making this merger a reality,” AFA President Roger Holmin said. “This contract should set our 24,000 flight attendants apart and establish us well above the rest of the industry.”
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