American Airlines Group is spreading the wealth after reporting record-breaking quarterly profits, saying it will pay its first stock dividend in 34 years and boost pension contributions to employees.
The Fort Worth-based company said Thursday that it earned $864 million in the second quarter, up from a combined $507 million that American and US Airways earned separately before their merger last year.
Excluding special charges, the company said it earned a record $1.46 billion, or $1.98 per share. Analysts previously surveyed by FactSet expected $1.95 a share.
“This is the best financial performance for any quarter in the long and proud history of American Airlines,” Doug Parker, chairman and chief executive officer, said in a letter to employees. “These record results are due to the great work of our 100,000 team members who are coming together to do a great job of taking care of our customers.”
Revenue increased by 10.2 percent as passengers paid 6.5 percent more per mile for their tickets.
American also said it will pay its first dividend since 1980, buy back up to $1 billion in shares, and spend money to pay off debt and aircraft leases. The dividend of 10 cents per share will be paid next month to shareholders of record as of Aug. 4.
American said that since the merger with US Airways closed in December 2013, the company has repaid $420 million of aircraft debt and bond obligations and will prepay $480 million of special facility revenue bond obligations. It is anticipated that these prepayments will represent a reduction in debt going forward, the company said.
American, which has already used $630 million in cash to purchase aircraft that were previously leased to the company, now anticipates spending an additional $370 million on this program through the rest of the year.
Besides talking about debt and aircraft purchases, American said it plans to do more for its employees by making supplemental contributions of $600 million to its defined benefit plans in 2014. These contributions would be above and beyond the $120 million minimum required contributions for the year.
“It is hard to believe that less than eight months ago, American was in bankruptcy yet today we are reporting record profits, repaying debt, making additional pension contributions and declaring dividends to shareholders,” Parker said in his letter.
“But we are not finished — there is a tremendous amount of work ahead, as we all know. Performance like this proves we are on the right track and gives us confidence as we move forward,” he said.
Capt. Keith Wilson, president of the Allied Pilots Association which represents 10,000 pilots at American, said they are “very encouraged” by the news and reminded everyone that the union “advocated aggressively” for the merger, something they hope to be rewarded for.
He said that American’s performance is in line with that of industry leader Delta Airlines, which reported Wednesday that its second-quarter earnings rose 17 percent, topping analysts predictions.
“After a decade of deep sacrifice, we look forward to sharing in the merger’s success,” Wilson said in a statement. “Our pilots’ compensation should be commensurate with American Airlines’ robust financial performance and in line with our industry peers.”
Among the other accomplishments mentioned in American’s quarterly earnings report were the new nonstop flights launched last month between Dallas-Fort Worth Airport and Hong Kong and Shanghai.
The company also pointed out that it recently reached three labor agreements with more than 11,000 US Airways mechanics, fleet service agents and maintenance training specialists who are members of the International Association of Machinists.
The union was the only labor group at US Airways and American that did not publicly support the merger of the two airlines. The machinists said US Airways executives had negotiated deals with American’s labor groups while neglecting contract talks with their own employees.
For fleet service workers, the tentative agreement also includes a signing bonus of $1,500. The mechanics’ contract includes 3 percent raises in each year of the contract and a merger seniority integration agreement.