UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2017
AMERICAN AIRLINES GROUP INC.
AMERICAN AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 1-8400 | 75-1825172 | ||
Delaware | 1-2691 | 13-1502798 | ||
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
4333 Amon Carter Blvd., Fort Worth, Texas | 76155 | |
4333 Amon Carter Blvd., Fort Worth, Texas | 76155 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code:
(817) 963-1234
(817) 963-1234
N/A | ||
(Former name or former address if changed since last report.) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
On October 26, 2017, American Airlines Group Inc. (the “Company”) issued a press release reporting financial results for the three and nine months ended September 30, 2017. The press release is furnished as Exhibit 99.1.
ITEM 7.01. | REGULATION FD DISCLOSURE. |
On October 26, 2017, the Company provided an update for investors presenting information relating to its financial and operational outlook for 2017. This investor update is located on the Company’s website at www.aa.com under “Investor Relations.” The investor update is furnished as Exhibit 99.2.
The information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits. | ||
Exhibit No. | Description | |
99.1 | ||
99.2 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, American Airlines Group Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AMERICAN AIRLINES GROUP INC. | |||
Date: October 26, 2017 | By: | /s/ Derek J. Kerr | |
Derek J. Kerr | |||
Executive Vice President and Chief Financial Officer | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, American Airlines, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AMERICAN AIRLINES, INC. | |||
Date: October 26, 2017 | By: | /s/ Derek J. Kerr | |
Derek J. Kerr | |||
Executive Vice President and Chief Financial Officer | |||
Exhibit 99.1
 | ||
Corporate Communications | ||
817-967-1577 | ||
mediarelations@aa.com | ||
FOR RELEASE: Thursday, October 26, 2017
AMERICAN AIRLINES GROUP REPORTS
THIRD-QUARTER PROFIT
FORT WORTH, Texas – American Airlines Group Inc. (NASDAQ: AAL) today reported its third-quarter 2017 results, including these highlights:
• | Recorded a third-quarter 2017 pre-tax profit of $1.0 billion, or $1.1 billion excluding net special items,1 and net profit of $624 million, or $692 million excluding net special items |
• | Reported third-quarter earnings of $1.28 per diluted share, or $1.42 per diluted share excluding net special items |
• | Reported a 2.7 percent increase in total revenue, to $10.9 billion, and a 1.1 percent increase in total revenue per available seat mile (TRASM) for the third quarter |
• | Returned $411 million to stockholders in the third quarter through the repurchase of 7.7 million shares for $362 million and dividend payments of $49 million |
Pre-tax earnings excluding net special items for the third quarter of 2017 were $1.1 billion, a $369 million decrease from the third quarter of 2016. During the third quarter, the company’s operations were affected by Hurricanes Harvey, Irma and Maria, causing more than 8,000 flight cancellations, and reducing pre-tax earnings by an estimated $75 million.
“Despite the significant operational challenges posed by three hurricanes, our team delivered solid financial results,” said Chairman and CEO Doug Parker. “The hurricane response highlighted the humanity and professionalism of the American team, and our industry as a whole.”
“We especially want to acknowledge the burden placed on our team members in Puerto Rico and throughout the Caribbean. The generous spirit of the American Airlines team was on full display as team members in Miami, Chicago and elsewhere packed meals and care packages for our colleagues and our customers in Puerto Rico. We also capped fares for customers traveling to and from the regions hit by these storms,” Parker said.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
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Revenue and Expenses
GAAP | Non-GAAP1 | |||||||||||||||
3Q17 | 3Q16 | 3Q17 | 3Q16 | |||||||||||||
Total operating revenues ($ mil) | $ | 10,878 | $ | 10,594 | $ | 10,878 | $ | 10,594 | ||||||||
Total operating expenses ($ mil) | 9,646 | 9,163 | 9,539 | 8,869 | ||||||||||||
Operating income ($ mil) | 1,232 | 1,431 | 1,339 | 1,725 | ||||||||||||
Pre-tax income ($ mil) | 1,004 | 1,189 | 1,114 | 1,483 | ||||||||||||
Pre-tax margin | 9.2 | % | 11.2 | % | 10.2 | % | 14.0 | % | ||||||||
Net income ($ mil) | 624 | 737 | 692 | 933 | ||||||||||||
Earnings per diluted share | $ | 1.28 | $ | 1.40 | $ | 1.42 | $ | 1.76 | ||||||||
Continued strong demand for air travel and improving yields drove a 2.7 percent year-over-year increase in total revenue, to $10.9 billion. For the first time since the second quarter of 2014, yield grew in every geographic region, with notable strength in Latin America. Cargo revenue was up 17.0 percent to $200 million due to a 19.2 percent increase in cargo ton miles. Other revenue was up 2.2 percent to $1.3 billion. Third-quarter TRASM increased by 1.1 percent on a 1.6 percent increase in total available seat miles.
Total third-quarter operating expenses were $9.6 billion, up 5.3 percent year-over-year due primarily to a 13.3 percent increase in consolidated fuel expense and an 8.0 percent increase in salaries and benefits resulting from the company’s investments in its team members. Total third-quarter cost per available seat mile (CASM) was 13.20 cents, up 3.6 percent. Excluding fuel and special items, total CASM was 10.43 cents, up 4.5 percent.
“We are playing the long game at American to create value in an industry that has been fundamentally transformed,” said Parker.
Strategic Objectives
At American’s Media & Investor Day last month, the company laid out four long-term strategic objectives: Build a World-Class Product, Drive Efficiencies, Make Culture a Competitive Advantage, and Think Forward, Lead Forward.
Build a World-Class Product
American continues to make significant investments in the premium travel experience. In August, the company opened a new Admirals Club lounge in Terminal 5 at Los Angeles International Airport, and in September, the company opened a new Flagship Lounge at Chicago O’Hare International Airport. American plans to open new Flagship Lounges with Flagship First Dining in Miami and Los Angeles later this quarter.
Demand for American’s highly-differentiated Premium Economy travel experience remains high. Offered on international flights, Premium Economy comes with a wider seat, more legroom, an amenity kit, and enhanced meal choices. American is pleased with the customer adoption of this product as it generates an average premium of more than $400 each way over Main Cabin fares. The company’s fleet now has Premium Economy seats on 27 of its widebody aircraft, with plans to retrofit most of its remaining widebodies by the end of 2018.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 3
In early September, American expanded its Basic Economy product throughout the continental United States. Basic Economy allows American to compete with ultra-low cost carriers while still offering a better product. Initial results of this new product’s rollout continue to be consistent with management’s expectations, with approximately half of American Airlines customers buying up to Main Cabin when given the option between that and Basic Economy.
“Continued product differentiation and a comprehensive network are just two of the ways American is setting itself apart. And we know we can do more. We have identified nearly $3 billion of revenue opportunities through 2021, including product segmentation, co-branded partnerships, and harmonizing our seating configurations across the fleet,” said American Airlines President Robert Isom.
Drive Efficiencies
As part of the company’s ongoing fleet renewal program, during the third quarter, American invested more than $900 million in 13 new mainline aircraft and three regional aircraft, including taking delivery of its first Boeing 737 MAX aircraft. These new, larger and more fuel efficient aircraft continue American’s fleet transformation and will replace aircraft that are expected to leave the fleet. In total, the company has invested more than $18 billion in new aircraft since the merger, giving it the youngest fleet of its network peers.
“We are focused on driving efficiencies and maximizing value for our investors. As we plan for the future, we have identified more than 400 efficiency-related projects which we estimate will provide $1 billion of benefit over the next four years. Examples include fuel initiatives, flight and route planning, improved schedule seasonality, and using our airport assets more productively,” said Chief Financial Officer Derek Kerr.
Make Culture a Competitive Advantage
Making culture a competitive advantage starts with leadership that cares for frontline team members. During the quarter, American expanded its Lead the Experience leadership training beyond corporate officers, and will expand this training further next year. In addition, American continues to roll out service training to frontline team members and anticipates 35,000 airport and reservation team members will have received this training by the end of this year, with plans to roll this training out further in 2018. Earlier this week, the company launched its first employee survey in well over a decade, which will provide more information to support frontline team members.
"We are building an environment where our leaders enthusiastically embrace the responsibility of caring for and inspiring our frontline team members. This environment includes a new technology platform for all team member data, development and training for our leaders, and investments in our team,” said Elise Eberwein, Executive Vice President of People and Communications.
Think Forward, Lead Forward
American has expanded the use of self-service technology during irregular operations, which enables customers to rebook on alternative flights and arrange for delivery of delayed bags from the convenience of a mobile device. This new technology gives customers more accurate, real-time information and options that work for them during difficult weather situations. This automation also frees up time for the company’s customer service team members to solve more complex issues.
“With the pace at which the world moves today, we know our technology solutions have to come faster, and they have to be adaptable across a variety of devices, including on-board handhelds, tablets, desktops and personal mobile devices. We are bringing more of our systems into the cloud environment, which enables us to deliver more, and finish projects faster,” said Maya Leibman, Chief Information
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 4
Officer. “All of our work comes back to making it easier for our team members to do their jobs, and making it easier for our customers to fly with American, and we are making significant improvements in both of these areas.”
Hurricane Response
American Airlines team members have worked together to help the people of San Juan, Puerto Rico and other affected parts of the Caribbean. American was the first commercial airline to restore service to San Juan after Hurricane Maria. American and its team members have delivered more than 2.5 million pounds of relief supplies and raised almost $2 million for the American Red Cross. In addition, team members in Chicago, New York, Fort Worth and Miami volunteered to pack more than 100,000 meals for hurricane victims, as well as 2,000 kits for military men and women currently serving in San Juan.
Over recent weeks, Tech Ops team members sent and served 600 hot meals for colleagues in San Juan. American Airlines team members have contributed more than $350,000, which American has matched, to the American Airlines Family Fund during the recent hurricane season. The Family Fund provides monetary relief to team members facing catastrophic and life-altering emergencies.
Capital Investments and Shareholder Returns
Since mid-2014, American has returned more than $11.1 billion to stockholders primarily through share repurchases and dividends, and reduced its share count by 37 percent to 480.0 million shares. As of September 30, 2017, the company had approximately $677 million remaining of its $2.0 billion share repurchase authority.2
The company declared a dividend of $0.10 per share, to be paid on November 27, 2017, to stockholders of record as of November 13, 2017.
Guidance and Investor Update
American expects its fourth-quarter TRASM to increase approximately 2.5 to 4.5 percent year-over-year, which reflects continued improvement in demand for both business and leisure travel. The company also expects its fourth-quarter pre-tax margin excluding special items to be between 4.5 and 6.5 percent.3
For additional financial forecasting detail, please refer to the company’s investor relations update, filed with the Securities and Exchange Commission on Form 8-K. This filing will be available at aa.com/investorrelations.
Conference Call / Webcast Details
The company will conduct a live audio webcast of its earnings call today at 9:00 a.m. CT, which will be available to the public on a listen-only basis at aa.com/investorrelations. An archive of the webcast will be available on the website through November 26.
Notes
1. | In the third quarter, the company recognized $110 million in net special items before the effect of income taxes, principally consisting of merger integration expenses and fleet restructuring expenses, offset in part by a net credit resulting from fair value adjustments to bankruptcy obligations. See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information. |
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 5
2. | Share repurchases under the buyback program 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 program does 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. |
3. | American is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time. |
About American Airlines Group
American Airlines and American Eagle offer an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries. American has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. American is a founding member of the oneworld® alliance, whose members serve more than 1,000 destinations with about 14,250 daily flights to over 150 countries. Shares of American Airlines Group Inc. trade on Nasdaq under the ticker symbol AAL. In 2015, its stock joined the S&P 500 index. Connect with American on Twitter @AmericanAir and at Facebook.com/AmericanAirlines.
Cautionary Statement Regarding Forward-Looking Statements and Information
Certain of the statements contained in this report should be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (especially in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A. Risk Factors), and other risks and uncertainties listed from time to time in our other filings with the Securities and Exchange Commission. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 6
American Airlines Group Inc.
Condensed Consolidated Statements of Operations
(In millions, except share and per share amounts)
(Unaudited)
3 Months Ended September 30, | Percent Change | 9 Months Ended September 30, | Percent Change | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Operating revenues: | |||||||||||||||||||||
Mainline passenger | $ | 7,628 | $ | 7,419 | 2.8 | $ | 21,981 | $ | 21,192 | 3.7 | |||||||||||
Regional passenger | 1,749 | 1,731 | 1.1 | 5,133 | 5,040 | 1.8 | |||||||||||||||
Cargo | 200 | 171 | 17.0 | 568 | 506 | 12.2 | |||||||||||||||
Other | 1,301 | 1,273 | 2.2 | 3,924 | 3,653 | 7.4 | |||||||||||||||
Total operating revenues | 10,878 | 10,594 | 2.7 | 31,606 | 30,391 | 4.0 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||
Aircraft fuel and related taxes | 1,570 | 1,393 | 12.7 | 4,481 | 3,736 | 19.9 | |||||||||||||||
Salaries, wages and benefits | 2,995 | 2,772 | 8.0 | 8,824 | 8,094 | 9.0 | |||||||||||||||
Regional expenses: | |||||||||||||||||||||
Fuel | 352 | 303 | 16.1 | 999 | 801 | 24.7 | |||||||||||||||
Other | 1,302 | 1,235 | 5.4 | 3,849 | 3,687 | 4.4 | |||||||||||||||
Maintenance, materials and repairs | 487 | 481 | 1.4 | 1,474 | 1,352 | 9.1 | |||||||||||||||
Other rent and landing fees | 471 | 463 | 1.7 | 1,363 | 1,342 | 1.6 | |||||||||||||||
Aircraft rent | 304 | 299 | 1.5 | 892 | 908 | (1.7 | ) | ||||||||||||||
Selling expenses | 400 | 347 | 15.1 | 1,094 | 990 | 10.5 | |||||||||||||||
Depreciation and amortization | 433 | 399 | 8.6 | 1,255 | 1,128 | 11.3 | |||||||||||||||
Special items, net | 112 | 289 | (61.2 | ) | 432 | 450 | (3.8 | ) | |||||||||||||
Other | 1,220 | 1,182 | 3.3 | 3,575 | 3,386 | 5.6 | |||||||||||||||
Total operating expenses | 9,646 | 9,163 | 5.3 | 28,238 | 25,874 | 9.1 | |||||||||||||||
Operating income | 1,232 | 1,431 | (13.9 | ) | 3,368 | 4,517 | (25.4 | ) | |||||||||||||
Nonoperating income (expense): | |||||||||||||||||||||
Interest income | 25 | 16 | 51.4 | 70 | 45 | 55.4 | |||||||||||||||
Interest expense, net | (266 | ) | (250 | ) | 6.6 | (787 | ) | (738 | ) | 6.6 | |||||||||||
Other, net | 13 | (8 | ) | nm | 8 | (25 | ) | nm | |||||||||||||
Total nonoperating expense, net | (228 | ) | (242 | ) | (5.4 | ) | (709 | ) | (718 | ) | (1.3 | ) | |||||||||
Income before income taxes | 1,004 | 1,189 | (15.6 | ) | 2,659 | 3,799 | (30.0 | ) | |||||||||||||
Income tax provision | 380 | 452 | (16.0 | ) | 998 | 1,412 | (29.3 | ) | |||||||||||||
Net income | $ | 624 | $ | 737 | (15.4 | ) | $ | 1,661 | $ | 2,387 | (30.4 | ) | |||||||||
Earnings per common share: | |||||||||||||||||||||
Basic | $ | 1.29 | $ | 1.40 | $ | 3.37 | $ | 4.23 | |||||||||||||
Diluted | $ | 1.28 | $ | 1.40 | $ | 3.35 | $ | 4.20 | |||||||||||||
Weighted average shares outstanding (in thousands): | |||||||||||||||||||||
Basic | 484,772 | 525,415 | 493,164 | 564,886 | |||||||||||||||||
Diluted | 486,625 | 528,510 | 495,796 | 568,679 | |||||||||||||||||
Note: Percent change may not recalculate due to rounding.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 7
American Airlines Group Inc.
Consolidated Operating Statistics
(Unaudited)
3 Months Ended September 30, | Change | 9 Months Ended September 30, | Change | ||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Mainline | |||||||||||||||
Revenue passenger miles (millions) | 54,012 | 53,472 | 1.0% | 152,400 | 151,619 | 0.5% | |||||||||
Available seat miles (ASM) (millions) | 64,582 | 63,751 | 1.3% | 184,665 | 183,985 | 0.4% | |||||||||
Passenger load factor (percent) | 83.6 | 83.9 | (0.3)pts | 82.5 | 82.4 | 0.1pts | |||||||||
Yield (cents) | 14.12 | 13.87 | 1.8% | 14.42 | 13.98 | 3.2% | |||||||||
Passenger revenue per ASM (cents) | 11.81 | 11.64 | 1.5% | 11.90 | 11.52 | 3.3% | |||||||||
Passenger enplanements (thousands) | 37,365 | 37,584 | (0.6)% | 108,886 | 109,830 | (0.9)% | |||||||||
Departures (thousands) | 275 | 282 | (2.4)% | 816 | 837 | (2.5)% | |||||||||
Aircraft at end of period | 947 | 922 | 2.7% | 947 | 922 | 2.7% | |||||||||
Block hours (thousands) | 893 | 905 | (1.3)% | 2,608 | 2,650 | (1.6)% | |||||||||
Average stage length (miles) | 1,278 | 1,258 | 1.6% | 1,245 | 1,235 | 0.8% | |||||||||
Fuel consumption (gallons in millions) | 947 | 953 | (0.6)% | 2,713 | 2,739 | (0.9)% | |||||||||
Average aircraft fuel price including related taxes (dollars per gallon) | 1.66 | 1.46 | 13.4% | 1.65 | 1.36 | 21.1% | |||||||||
Full-time equivalent employees at end of period | 105,000 | 101,200 | 3.8% | 105,000 | 101,200 | 3.8% | |||||||||
Operating cost per ASM (cents) | 12.37 | 11.96 | 3.5% | 12.67 | 11.62 | 9.0% | |||||||||
Operating cost per ASM excluding special items (cents) | 12.20 | 11.51 | 6.0% | 12.43 | 11.38 | 9.3% | |||||||||
Operating cost per ASM excluding special items and fuel (cents) | 9.77 | 9.32 | 4.8% | 10.01 | 9.35 | 7.0% | |||||||||
Regional (A) | |||||||||||||||
Revenue passenger miles (millions) | 6,459 | 6,447 | 0.2% | 18,619 | 18,406 | 1.2% | |||||||||
Available seat miles (millions) | 8,471 | 8,160 | 3.8% | 24,471 | 23,741 | 3.1% | |||||||||
Passenger load factor (percent) | 76.3 | 79.0 | (2.7)pts | 76.1 | 77.5 | (1.4)pts | |||||||||
Yield (cents) | 27.08 | 26.85 | 0.9% | 27.57 | 27.38 | 0.7% | |||||||||
Passenger revenue per ASM (cents) | 20.65 | 21.21 | (2.7)% | 20.97 | 21.23 | (1.2)% | |||||||||
Passenger enplanements (thousands) | 14,073 | 14,288 | (1.5)% | 40,727 | 40,908 | (0.4)% | |||||||||
Aircraft at end of period | 611 | 599 | 2.0% | 611 | 599 | 2.0% | |||||||||
Fuel consumption (gallons in millions) | 201 | 196 | 2.6% | 578 | 565 | 2.4% | |||||||||
Average aircraft fuel price including related taxes (dollars per gallon) | 1.75 | 1.55 | 13.1% | 1.73 | 1.42 | 21.8% | |||||||||
Full-time equivalent employees at end of period (B) | 22,600 | 20,600 | 9.7% | 22,600 | 20,600 | 9.7% | |||||||||
Operating cost per ASM (cents) | 19.53 | 18.85 | 3.6% | 19.81 | 18.91 | 4.8% | |||||||||
Operating cost per ASM excluding special items (cents) | 19.59 | 18.79 | 4.3% | 19.82 | 18.85 | 5.1% | |||||||||
Operating cost per ASM excluding special items and fuel (cents) | 15.44 | 15.08 | 2.4% | 15.73 | 15.48 | 1.6% | |||||||||
Total Mainline & Regional | |||||||||||||||
Revenue passenger miles (millions) | 60,471 | 59,919 | 0.9% | 171,019 | 170,025 | 0.6% | |||||||||
Available seat miles (millions) | 73,053 | 71,911 | 1.6% | 209,136 | 207,726 | 0.7% | |||||||||
Cargo ton miles (millions) | 716 | 601 | 19.2% | 2,036 | 1,754 | 16.1% | |||||||||
Passenger load factor (percent) | 82.8 | 83.3 | (0.5)pts | 81.8 | 81.9 | (0.1)pts | |||||||||
Yield (cents) | 15.51 | 15.27 | 1.6% | 15.85 | 15.43 | 2.8% | |||||||||
Passenger revenue per ASM (cents) | 12.84 | 12.72 | 0.9% | 12.96 | 12.63 | 2.7% | |||||||||
Total revenue per ASM (cents) | 14.89 | 14.73 | 1.1% | 15.11 | 14.63 | 3.3% | |||||||||
Cargo yield per ton mile (cents) | 27.89 | 28.42 | (1.9)% | 27.89 | 28.86 | (3.4)% | |||||||||
Passenger enplanements (thousands) | 51,438 | 51,872 | (0.8)% | 149,613 | 150,738 | (0.7)% | |||||||||
Aircraft at end of period | 1,558 | 1,521 | 2.4% | 1,558 | 1,521 | 2.4% | |||||||||
Fuel consumption (gallons in millions) | 1,148 | 1,149 | —% | 3,291 | 3,304 | (0.4)% | |||||||||
Average aircraft fuel price including related taxes (dollars per gallon) | 1.67 | 1.48 | 13.3% | 1.67 | 1.37 | 21.2% | |||||||||
Full-time equivalent employees at end of period (B) | 127,600 | 121,800 | 4.8% | 127,600 | 121,800 | 4.8% | |||||||||
Operating cost per ASM (cents) | 13.20 | 12.74 | 3.6% | 13.50 | 12.46 | 8.4% | |||||||||
Operating cost per ASM excluding special items (cents) | 13.06 | 12.33 | 5.9% | 13.30 | 12.23 | 8.7% | |||||||||
Operating cost per ASM excluding special items and fuel (cents) | 10.43 | 9.97 | 4.5% | 10.68 | 10.05 | 6.2% | |||||||||
(A) | Regional includes wholly owned regional airline subsidiaries and operating results from capacity purchase carriers. |
(B) | Regional full-time equivalent employees only include our wholly owned regional airline subsidiaries. |
Note: Amounts may not recalculate due to rounding.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 8
American Airlines Group Inc.
Consolidated Revenue Statistics by Region
(Unaudited)
3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | ||||||
Domestic - Mainline | |||||||||||
Revenue passenger miles (millions) | 33,032 | 33,487 | (1.4)% | 95,341 | 97,296 | (2.0)% | |||||
Available seat miles (ASM) (millions) | 38,750 | 39,051 | (0.8)% | 112,647 | 114,294 | (1.4)% | |||||
Passenger load factor (percent) | 85.2 | 85.8 | (0.6)pts | 84.6 | 85.1 | (0.5)pts | |||||
Yield (cents) | 14.52 | 14.36 | 1.1% | 15.12 | 14.51 | 4.2% | |||||
Passenger revenue per ASM (cents) | 12.37 | 12.31 | 0.5% | 12.79 | 12.35 | 3.6% | |||||
Domestic Consolidated - Mainline and Total Regional (A) | |||||||||||
Revenue passenger miles (millions) | 39,491 | 39,934 | (1.1)% | 113,960 | 115,701 | (1.5)% | |||||
Available seat miles (millions) | 47,221 | 47,211 | —% | 137,118 | 138,036 | (0.7)% | |||||
Passenger load factor (percent) | 83.6 | 84.6 | (1.0)pts | 83.1 | 83.8 | (0.7)pts | |||||
Yield (cents) | 16.57 | 16.37 | 1.2% | 17.15 | 16.56 | 3.6% | |||||
Passenger revenue per ASM (cents) | 13.86 | 13.85 | 0.1% | 14.25 | 13.88 | 2.7% | |||||
Latin America | |||||||||||
Revenue passenger miles (millions) | 7,362 | 7,382 | (0.3)% | 22,445 | 22,857 | (1.8)% | |||||
Available seat miles (millions) | 8,919 | 8,944 | (0.3)% | 28,432 | 28,894 | (1.6)% | |||||
Passenger load factor (percent) | 82.5 | 82.5 | —pts | 78.9 | 79.1 | (0.2)pts | |||||
Yield (cents) | 15.12 | 13.97 | 8.2% | 14.88 | 13.47 | 10.4% | |||||
Passenger revenue per ASM (cents) | 12.48 | 11.53 | 8.3% | 11.74 | 10.66 | 10.2% | |||||
Atlantic | |||||||||||
Revenue passenger miles (millions) | 9,728 | 9,027 | 7.8% | 23,077 | 21,707 | 6.3% | |||||
Available seat miles (millions) | 12,212 | 11,533 | 5.9% | 29,554 | 29,103 | 1.5% | |||||
Passenger load factor (percent) | 79.7 | 78.3 | 1.4pts | 78.1 | 74.6 | 3.5pts | |||||
Yield (cents) | 13.60 | 13.49 | 0.9% | 13.37 | 14.01 | (4.6)% | |||||
Passenger revenue per ASM (cents) | 10.84 | 10.56 | 2.6% | 10.44 | 10.45 | (0.1)% | |||||
Pacific | |||||||||||
Revenue passenger miles (millions) | 3,890 | 3,576 | 8.8% | 11,537 | 9,759 | 18.2% | |||||
Available seat miles (millions) | 4,701 | 4,223 | 11.3% | 14,032 | 11,694 | 20.0% | |||||
Passenger load factor (percent) | 82.7 | 84.7 | (2.0)pts | 82.2 | 83.5 | (1.3)pts | |||||
Yield (cents) | 10.20 | 10.13 | 0.7% | 9.92 | 9.79 | 1.3% | |||||
Passenger revenue per ASM (cents) | 8.44 | 8.58 | (1.6)% | 8.15 | 8.17 | (0.2)% | |||||
Total International | |||||||||||
Revenue passenger miles (millions) | 20,980 | 19,985 | 5.0% | 57,059 | 54,323 | 5.0% | |||||
Available seat miles (millions) | 25,832 | 24,700 | 4.6% | 72,018 | 69,691 | 3.3% | |||||
Passenger load factor (percent) | 81.2 | 80.9 | 0.3pts | 79.2 | 77.9 | 1.3pts | |||||
Yield (cents) | 13.50 | 13.06 | 3.4% | 13.26 | 13.03 | 1.8% | |||||
Passenger revenue per ASM (cents) | 10.97 | 10.57 | 3.8% | 10.51 | 10.15 | 3.5% | |||||
(A) Revenue statistics for all Regional flying are included herein.
Note: Amounts may not recalculate due to rounding.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 9
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
American Airlines Group Inc. (the “Company”) sometimes uses financial measures that are derived from the consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate its current operating performance and to allow for period-to-period comparisons. The Company believes these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. The Company is providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.
The tables below present the reconciliations of the following GAAP measures to their non-GAAP measure:
• | Pre-Tax Income (GAAP measure) to Pre-Tax Income Excluding Special Items (non-GAAP measure) |
• | Pre-Tax Margin (GAAP measure) to Pre-Tax Margin Excluding Special Items (non-GAAP measure) |
• | Net Income (GAAP measure) to Net Income Excluding Special Items (non-GAAP measure) |
• | Basic and Diluted Earnings Per Share (GAAP measure) to Basic and Diluted Earnings Per Share Excluding Special Items (non-GAAP measure) |
• | Operating Income (GAAP measure) to Operating Income Excluding Special Items (non-GAAP measure) |
Management uses these non-GAAP financial measures to evaluate the Company’s current operating performance and to allow for period-to-period comparisons. As special items may vary from period-to-period in nature and amount, the adjustment to exclude special items allows management an additional tool to better understand the Company’s core operating performance.
Additionally, the tables below present the reconciliations of mainline, regional and total operating costs (GAAP measure) to mainline, regional and total operating costs excluding special items and fuel (non-GAAP measure). Management uses mainline, regional and total operating costs excluding special items and fuel to evaluate the Company’s current operating performance and for period-to-period comparisons. The price of fuel, over which the Company has no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and special items allows management an additional tool to better understand and analyze the Company’s non-fuel costs and core operating performance.
Reconciliation of Pre-Tax Income Excluding Special Items | 3 Months Ended September 30, | Percent Change | 9 Months Ended September 30, | Percent Change | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||
Pre-tax income as reported | $ | 1,004 | $ | 1,189 | $ | 2,659 | $ | 3,799 | ||||||||||||
Pre-tax special items: | ||||||||||||||||||||
Special items, net (1) | 112 | 289 | 432 | 450 | ||||||||||||||||
Regional operating special items, net | (5 | ) | 5 | (1 | ) | 13 | ||||||||||||||
Nonoperating special items, net (2) | 3 | — | 12 | 36 | ||||||||||||||||
Total pre-tax special items | 110 | 294 | 443 | 499 | ||||||||||||||||
Pre-tax income excluding special items | $ | 1,114 | $ | 1,483 | -25% | $ | 3,102 | $ | 4,298 | -28% | ||||||||||
Calculation of Pre-Tax Margin | ||||||||||||||||||||
Pre-tax income as reported | $ | 1,004 | $ | 1,189 | $ | 2,659 | $ | 3,799 | ||||||||||||
Total operating revenues as reported | $ | 10,878 | $ | 10,594 | $ | 31,606 | $ | 30,391 | ||||||||||||
Pre-tax margin | 9.2 | % | 11.2 | % | 8.4 | % | 12.5 | % | ||||||||||||
Calculation of Pre-Tax Margin Excluding Special Items | ||||||||||||||||||||
Pre-tax income excluding special items | $ | 1,114 | $ | 1,483 | $ | 3,102 | $ | 4,298 | ||||||||||||
Total operating revenues as reported | $ | 10,878 | $ | 10,594 | $ | 31,606 | $ | 30,391 | ||||||||||||
Pre-tax margin excluding special items | 10.2 | % | 14.0 | % | 9.8 | % | 14.1 | % | ||||||||||||
Reconciliation of Net Income Excluding Special Items | ||||||||||||||||||||
Net income as reported | $ | 624 | $ | 737 | $ | 1,661 | $ | 2,387 | ||||||||||||
Special items: | ||||||||||||||||||||
Total pre-tax special items (1) (2) | 110 | 294 | 443 | 499 | ||||||||||||||||
Net tax effect of special items | (42 | ) | (98 | ) | (160 | ) | (188 | ) | ||||||||||||
Net income excluding special items | $ | 692 | $ | 933 | -26% | $ | 1,944 | $ | 2,698 | -28% | ||||||||||
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 10
Reconciliation of Basic and Diluted Earnings Per Share Excluding Special Items | 3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in millions, except per share amounts) | (in millions, except per share amounts) | |||||||||||||||
Net income excluding special items | $ | 692 | $ | 933 | $ | 1,944 | $ | 2,698 | ||||||||
Shares used for computation (in thousands): | ||||||||||||||||
Basic | 484,772 | 525,415 | 493,164 | 564,886 | ||||||||||||
Diluted | 486,625 | 528,510 | 495,796 | 568,679 | ||||||||||||
Earnings per share excluding special items: | ||||||||||||||||
Basic | $ | 1.43 | $ | 1.77 | $ | 3.94 | $ | 4.78 | ||||||||
Diluted | $ | 1.42 | $ | 1.76 | $ | 3.92 | $ | 4.74 | ||||||||
Reconciliation of Operating Income Excluding Special Items | ||||||||||||||||
Operating income as reported | $ | 1,232 | $ | 1,431 | $ | 3,368 | $ | 4,517 | ||||||||
Special items: | ||||||||||||||||
Special items, net (1) | 112 | 289 | 432 | 450 | ||||||||||||
Regional operating special items, net | (5 | ) | 5 | (1 | ) | 13 | ||||||||||
Operating income excluding special items | $ | 1,339 | $ | 1,725 | $ | 3,799 | $ | 4,980 | ||||||||
Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Mainline only | 3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Total operating expenses as reported | $ | 9,646 | $ | 9,163 | $ | 28,238 | $ | 25,874 | ||||||||
Less regional expenses as reported: | ||||||||||||||||
Fuel | (352 | ) | (303 | ) | (999 | ) | (801 | ) | ||||||||
Other | (1,302 | ) | (1,235 | ) | (3,849 | ) | (3,687 | ) | ||||||||
Total mainline operating expenses as reported | 7,992 | 7,625 | 23,390 | 21,386 | ||||||||||||
Special items, net (1) | (112 | ) | (289 | ) | (432 | ) | (450 | ) | ||||||||
Mainline operating expenses, excluding special items | 7,880 | 7,336 | 22,958 | 20,936 | ||||||||||||
Aircraft fuel and related taxes | (1,570 | ) | (1,393 | ) | (4,481 | ) | (3,736 | ) | ||||||||
Mainline operating expenses, excluding special items and fuel | $ | 6,310 | $ | 5,943 | $ | 18,477 | $ | 17,200 | ||||||||
(in cents) | (in cents) | |||||||||||||||
Mainline operating expenses per ASM as reported | 12.37 | 11.96 | 12.67 | 11.62 | ||||||||||||
Special items, net per ASM (1) | (0.17 | ) | (0.45 | ) | (0.23 | ) | (0.24 | ) | ||||||||
Mainline operating expenses per ASM, excluding special items | 12.20 | 11.51 | 12.43 | 11.38 | ||||||||||||
Aircraft fuel and related taxes per ASM | (2.43 | ) | (2.18 | ) | (2.43 | ) | (2.03 | ) | ||||||||
Mainline operating expenses per ASM, excluding special items and fuel | 9.77 | 9.32 | 10.01 | 9.35 | ||||||||||||
Note: Amounts may not recalculate due to rounding.
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 11
Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Regional only | 3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Total regional operating expenses as reported | $ | 1,654 | $ | 1,538 | $ | 4,848 | $ | 4,488 | ||||||||
Regional operating special items, net | 5 | (5 | ) | 1 | (13 | ) | ||||||||||
Regional operating expenses, excluding special items | 1,659 | 1,533 | 4,849 | 4,475 | ||||||||||||
Aircraft fuel and related taxes | (352 | ) | (303 | ) | (999 | ) | (801 | ) | ||||||||
Regional operating expenses, excluding special items and fuel | $ | 1,307 | $ | 1,230 | $ | 3,850 | $ | 3,674 | ||||||||
(in cents) | (in cents) | |||||||||||||||
Regional operating expenses per ASM as reported | 19.53 | 18.85 | 19.81 | 18.91 | ||||||||||||
Regional operating special items, net per ASM | 0.06 | (0.06 | ) | 0.01 | (0.05 | ) | ||||||||||
Regional operating expenses per ASM, excluding special items | 19.59 | 18.79 | 19.82 | 18.85 | ||||||||||||
Aircraft fuel and related taxes per ASM | (4.15 | ) | (3.71 | ) | (4.08 | ) | (3.38 | ) | ||||||||
Regional operating expenses per ASM, excluding special items and fuel | 15.44 | 15.08 | 15.73 | 15.48 | ||||||||||||
Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Total Mainline and Regional | 3 Months Ended September 30, | 9 Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Total operating expenses as reported | $ | 9,646 | $ | 9,163 | $ | 28,238 | $ | 25,874 | ||||||||
Special items: | ||||||||||||||||
Special items, net (1) | (112 | ) | (289 | ) | (432 | ) | (450 | ) | ||||||||
Regional operating special items, net | 5 | (5 | ) | 1 | (13 | ) | ||||||||||
Total operating expenses, excluding special items | 9,539 | 8,869 | 27,807 | 25,411 | ||||||||||||
Fuel: | ||||||||||||||||
Aircraft fuel and related taxes - mainline | (1,570 | ) | (1,393 | ) | (4,481 | ) | (3,736 | ) | ||||||||
Aircraft fuel and related taxes - regional | (352 | ) | (303 | ) | (999 | ) | (801 | ) | ||||||||
Total operating expenses, excluding special items and fuel | $ | 7,617 | $ | 7,173 | $ | 22,327 | $ | 20,874 | ||||||||
(in cents) | (in cents) | |||||||||||||||
Total operating expenses per ASM as reported | 13.20 | 12.74 | 13.50 | 12.46 | ||||||||||||
Special items per ASM: | ||||||||||||||||
Special items, net (1) | (0.15 | ) | (0.40 | ) | (0.21 | ) | (0.22 | ) | ||||||||
Regional operating special items, net | 0.01 | (0.01 | ) | — | (0.01 | ) | ||||||||||
Total operating expenses per ASM, excluding special items | 13.06 | 12.33 | 13.30 | 12.23 | ||||||||||||
Fuel per ASM: | ||||||||||||||||
Aircraft fuel and related taxes - mainline | (2.15 | ) | (1.94 | ) | (2.14 | ) | (1.80 | ) | ||||||||
Aircraft fuel and related taxes - regional | (0.48 | ) | (0.42 | ) | (0.48 | ) | (0.39 | ) | ||||||||
Total operating expenses per ASM, excluding special items and fuel | 10.43 | 9.97 | 10.68 | 10.05 | ||||||||||||
FOOTNOTES:
(1) | The 2017 third quarter mainline operating special items totaled a net charge of $112 million, which principally included $62 million of merger integration expenses and $62 million of fleet restructuring expenses, offset in part by a $12 million net credit resulting from fair value adjustments to bankruptcy obligations. The 2017 nine-month period mainline operating special items totaled a net charge of $432 million, which principally included $192 million of merger integration expenses, $174 million of fleet restructuring expenses, $45 million for labor contract expenses primarily due to one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments effective in the second quarter of 2017 and a $7 million net charge resulting from fair value adjustments to bankruptcy obligations. |
The 2016 third quarter mainline operating special items totaled a net charge of $289 million, which principally included $194 million of merger integration expenses, $31 million of fleet restructuring expenses and a $39 million net charge resulting from fair value adjustments to bankruptcy obligations. The 2016 nine-month period mainline operating special items totaled a net charge of $450 million, which principally included $395 million of merger integration expenses and $72 million of fleet restructuring expenses, offset in part by a $22 million net credit resulting from fair value adjustments to bankruptcy obligations.
Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training. Additionally, the 2016 periods also included merger integration expenses related to alignment of labor union contracts, re-branded uniforms, relocation and severance. Fleet restructuring expenses driven by the merger principally included the acceleration of aircraft depreciation and impairments for aircraft grounded or expected to be grounded earlier than planned.
(2) | Nonoperating special charges in the 2017 periods primarily consisted of debt issuance and extinguishment costs associated with term loan refinancings. Additionally, the 2016 nine month period included costs associated with a bond refinancing. |
American Airlines Group Reports Third-Quarter Results
October 26, 2017
Page 12
American Airlines Group Inc.
Condensed Consolidated Balance Sheets
(In millions)
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 340 | $ | 322 | ||||
Short-term investments | 5,428 | 6,037 | ||||||
Restricted cash and short-term investments | 393 | 638 | ||||||
Accounts receivable, net | 1,700 | 1,594 | ||||||
Aircraft fuel, spare parts and supplies, net | 1,315 | 1,094 | ||||||
Prepaid expenses and other | 826 | 639 | ||||||
Total current assets | 10,002 | 10,324 | ||||||
Operating property and equipment | ||||||||
Flight equipment | 39,545 | 37,028 | ||||||
Ground property and equipment | 7,902 | 7,116 | ||||||
Equipment purchase deposits | 1,280 | 1,209 | ||||||
Total property and equipment, at cost | 48,727 | 45,353 | ||||||
Less accumulated depreciation and amortization | (15,416 | ) | (14,194 | ) | ||||
Total property and equipment, net | 33,311 | 31,159 | ||||||
Other assets | ||||||||
Goodwill | 4,091 | 4,091 | ||||||
Intangibles, net | 2,214 | 2,173 | ||||||
Deferred tax asset | 538 | 1,498 | ||||||
Other assets | 2,245 | 2,029 | ||||||
Total other assets | 9,088 | 9,791 | ||||||
Total assets | $ | 52,401 | $ | 51,274 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Current maturities of long-term debt and capital leases | $ | 2,467 | $ | 1,855 | ||||
Accounts payable | 1,638 | 1,592 | ||||||
Accrued salaries and wages | 1,413 | 1,516 | ||||||
Air traffic liability | 4,653 | 3,912 | ||||||
Loyalty program liability | 2,893 | 2,789 | ||||||
Other accrued liabilities | 2,243 | 2,208 | ||||||
Total current liabilities | 15,307 | 13,872 | ||||||
Noncurrent liabilities | ||||||||
Long-term debt and capital leases, net of current maturities | 22,217 | 22,489 | ||||||
Pension and postretirement benefits | 7,467 | 7,842 | ||||||
Other liabilities | 3,462 | 3,286 | ||||||
Total noncurrent liabilities | 33,146 | 33,617 | ||||||
Stockholders' equity | ||||||||
Common stock | 5 | 5 | ||||||
Additional paid-in capital | 5,918 | 7,223 | ||||||
Accumulated other comprehensive loss | (5,127 | ) | (5,083 | ) | ||||
Retained earnings | 3,152 | 1,640 | ||||||
Total stockholders' equity | 3,948 | 3,785 | ||||||
Total liabilities and stockholders’ equity | $ | 52,401 | $ | 51,274 | ||||
Exhibit 99.2
Investor Relations Update
October 26, 2017
General Overview
• | TRASM and Pre-tax Margin – The company expects its fourth quarter total revenue per available seat mile (TRASM) to be up approximately 2.5 to 4.5 percent year-over-year. In addition, the company expects its fourth quarter pre-tax margin excluding special items to be approximately 4.5 to 6.5 percent.1 |
• | CASM – Consolidated CASM excluding fuel and special items1 is expected to be up approximately 5.5 percent in 2017. Fourth quarter consolidated CASM excluding fuel and special items1 is expected to be up approximately 4.5 percent year-over-year due primarily to salary and benefit increases provided to our team members (including the salary increases given to our pilots and flight attendants), higher revenue-related expenses, and higher depreciation and amortization resulting from increased capex. |
• | Capacity – 2017 total system capacity is expected to be up approximately 1 percent vs. 2016. Full year domestic capacity is expected to be approximately flat year-over-year, while international capacity is expected to be up approximately 4 percent vs. 2016. |
• | Liquidity – As of September 30, 2017, the company had approximately $8.3 billion in total available liquidity, comprised of unrestricted cash and investments of $5.8 billion and $2.5 billion in undrawn revolver capacity. The company also had a restricted cash position of $393 million. |
• | Fuel – Based on the October 13, 2017 forward curve, the company expects to pay an average of between $1.80 and $1.85 per gallon of mainline jet fuel (including taxes) in the fourth quarter. Forecasted volume and fuel prices are provided in the following pages. |
• | Cargo / Other Revenue – Includes cargo revenue, loyalty program revenue, ticket change fees, excess/overweight baggage fees, first and second bag fees, contract services, airport clubs and inflight service revenues. |
• | Taxes – As of December 31, 2016, the company had approximately $10.5 billion of federal net operating losses (NOLs) and $3.7 billion of state NOLs, substantially all of which are expected to be available in 2017 to reduce future federal and state taxable income. The company expects to recognize a provision for income taxes in 2017 at an effective rate of approximately 38 percent, which will be substantially non-cash. |
Notes:
1. | The company is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Mainline Update
October 26, 2017
Mainline Comments
• | All operating expenses are for mainline operated flights only. Please refer to the following page for information pertaining to regional data. |
• | The year-over-year increase in mainline CASM excluding fuel and special items is primarily driven by investments in new labor agreements (including the previously announced flight attendant and pilot pay adjustments), investments in the operation, and higher depreciation and amortization resulting from increased capex. |
1Q17A | 2Q17A | 3Q17A | 4Q17E | FY17E2 | ||||||||
Mainline Guidance1 | ||||||||||||
Available Seat Miles (ASMs) (bil) | 56.6 | 63.5 | 64.6 | ~58.9 | ~243.5 | |||||||
CASM ex fuel and special items (YOY % change)3 | 10.48 | 9.82 | 9.77 | +4% to +6% | +5.5% to +7.5% | |||||||
Cargo Revenues ($ mil) | 172 | 196 | 200 | ~210 | ~778 | |||||||
Other Revenues ($ mil) | 1,297 | 1,327 | 1,301 | ~1,300 | ~5,225 | |||||||
Average Fuel Price (incl. taxes) ($/gal) (as of 10/13/2017) | 1.69 | 1.62 | 1.66 | 1.80 to 1.85 | 1.67 to 1.72 | |||||||
Fuel Gallons Consumed (mil) | 831 | 934 | 947 | ~871 | ~3,583 | |||||||
Interest Income ($ mil) | (21 | ) | (24 | ) | (25 | ) | ~(20) | ~(90) | ||||
Interest Expense ($ mil) | 257 | 263 | 266 | ~272 | ~1,058 | |||||||
Other Non-Operating (Income)/Expense ($ mil)4 | (5 | ) | 3 | (16 | ) | ~(3) | ~(22) | |||||
CAPEX Guidance ($ mil) Inflow/(Outflow) | ||||||||||||
Non-Aircraft CAPEX | (439 | ) | (404 | ) | (431 | ) | ~(376) | ~(1,650) | ||||
Gross Aircraft CAPEX & net PDPs | (1,206 | ) | (1,080 | ) | (938 | ) | ~(872) | ~(4,096) | ||||
Assumed Aircraft Financing | 899 | 993 | 810 | ~728 | ~3,430 | |||||||
Net Aircraft CAPEX & PDPs2 | (307 | ) | (87 | ) | (128 | ) | ~(145) | ~(666) | ||||
Notes:
1. | Includes guidance on certain non-GAAP measures, which exclude special items. The company is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
2. | Numbers may not recalculate due to rounding. |
3. | CASM ex fuel and special items is a non-GAAP financial measure. |
4. | Other Non-Operating (Income)/Expense primarily includes gains and losses from foreign currency and income/loss from the company’s approximate 25% ownership interest in Republic Airways Holdings Inc. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Regional Update
October 26, 2017
Regional Comments
• | The company receives feed from 10 regional airlines, including wholly owned subsidiaries Envoy, PSA Airlines and Piedmont Airlines. |
• | Fourth quarter CASM excluding fuel and special items increased from previous guidance due primarily to pilot hiring initiatives and maintenance timing. |
1Q17A | 2Q17A | 3Q17A | 4Q17E | FY17E2 | ||||||||
Regional Guidance1 | ||||||||||||
Available Seat Miles (ASMs) (bil) | 7.78 | 8.22 | 8.47 | ~8.11 | ~32.58 | |||||||
CASM ex fuel and special items (YOY % change)3 | 16.10 | 15.69 | 15.44 | +1% to +3% | +1% to +3% | |||||||
Average Fuel Price (incl. taxes) ($/gal) (as of 10/13/2017) | 1.75 | 1.69 | 1.75 | 1.88 to 1.93 | 1.75 to 1.80 | |||||||
Fuel Gallons Consumed (mil) | 182 | 195 | 201 | ~195 | ~773 | |||||||
Regional Airlines | ||||
Envoy Air Inc.4 | Mesa Airlines, Inc. | |||
SkyWest Airlines, Inc.5 | Piedmont Airlines, Inc.4 | |||
ExpressJet Airlines, Inc.5 | PSA Airlines, Inc.4 | |||
Republic Airline Inc. | Trans States Airlines, Inc. | |||
Air Wisconsin Airlines Corporation | Compass Airlines, LLC | |||
Notes:
1. | Includes guidance on certain non-GAAP measures. The company is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
2. | Numbers may not recalculate due to rounding. |
3. | CASM ex fuel and special items is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
4. | Wholly owned subsidiary of American Airlines Group Inc. |
5. | Pro-rate agreement and capacity purchase agreement. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Fleet Update
October 26, 2017
Fleet Comments
• | In 2017, the company expects to take delivery of 57 mainline aircraft comprised of 20 A321 aircraft, 20 B738 aircraft, 4 B738 Max aircraft, 3 B788 aircraft, and 10 B789 aircraft. The company also expects to retire 39 mainline aircraft, including 3 A320 aircraft, 17 B757 aircraft, 7 B763 aircraft and 12 MD80 aircraft. |
• | In 2017, the company expects to reduce the regional fleet count by a net of 8 aircraft, resulting from the addition of 31 CRJ700 aircraft, 24 E175 aircraft and 8 ERJ140 aircraft, as well as the reduction of 52 CRJ200 aircraft and 19 Dash 8-100 aircraft. |
Active Mainline Ending Fleet Count | Active Regional Ending Fleet Count1 | |||||||||||||||||||||||||||||||
2016A | 1Q17A | 2Q17A | 3Q17A | 4Q17E | 2016A | 1Q17A | 2Q17A | 3Q17A | 4Q17E | |||||||||||||||||||||||
A319 | 125 | 125 | 125 | 125 | 125 | CRJ200 | 120 | 123 | 122 | 95 | 68 | |||||||||||||||||||||
A320 | 51 | 49 | 48 | 48 | 48 | CRJ700 | 79 | 93 | 105 | 110 | 110 | |||||||||||||||||||||
A321 | 199 | 207 | 214 | 219 | 219 | CRJ900 | 118 | 118 | 118 | 118 | 118 | |||||||||||||||||||||
A332 | 15 | 15 | 15 | 15 | 15 | DASH 8-100 | 23 | 17 | 12 | 8 | 4 | |||||||||||||||||||||
A333 | 9 | 9 | 9 | 9 | 9 | DASH 8-300 | 11 | 11 | 11 | 11 | 11 | |||||||||||||||||||||
B738 | 284 | 289 | 294 | 299 | 304 | E175 | 124 | 137 | 141 | 144 | 148 | |||||||||||||||||||||
B738 Max | - | - | - | 1 | 4 | ERJ140 | 13 | 6 | - | 7 | 21 | |||||||||||||||||||||
B757 | 51 | 51 | 51 | 40 | 34 | ERJ145 | 118 | 118 | 118 | 118 | 118 | |||||||||||||||||||||
B763 | 31 | 31 | 31 | 27 | 24 | 606 | 623 | 627 | 611 | 598 | ||||||||||||||||||||||
B772 | 47 | 47 | 47 | 47 | 47 | |||||||||||||||||||||||||||
B773 | 20 | 20 | 20 | 20 | 20 | |||||||||||||||||||||||||||
B788 | 17 | 19 | 20 | 20 | 20 | |||||||||||||||||||||||||||
B789 | 4 | 6 | 9 | 11 | 14 | |||||||||||||||||||||||||||
E190 | 20 | 20 | 20 | 20 | 20 | |||||||||||||||||||||||||||
MD80 | 57 | 56 | 53 | 46 | 45 | |||||||||||||||||||||||||||
930 | 944 | 956 | 947 | 948 | ||||||||||||||||||||||||||||
Notes:
1. | At the end of the third quarter, the company had 52 ERJ140 regional aircraft in temporary storage, which are not included in the active regional ending fleet count. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Shares Outstanding
October 26, 2017
Shares Outstanding Comments
• | The estimated weighted average shares outstanding for 2017 are listed below. |
• | On January 25, 2017, the company’s Board authorized a new $2.0 billion share repurchase program to expire by the end of 2018. This brings the total amount authorized for share repurchase programs to $11.0 billion since the merger. All prior repurchase programs had been fully expended as of December 31, 2016. |
• | In the third quarter of 2017, the company repurchased 7.7 million shares at a cost of $362 million. Including share repurchases, shares withheld to cover taxes associated with employee equity awards and share distributions, and the cash extinguishment of convertible debt, the company’s share count has dropped 37 percent from 756.1 million shares at merger close to 480.0 million shares outstanding on September 30, 2017. |
2017 Shares Outstanding (shares mil)1 | ||||||
Shares | ||||||
For Q4 | Basic | Diluted | ||||
Earnings | 480 | 482 | ||||
Net loss | 480 | 480 | ||||
Shares | ||||||
For FY 2017 Average | Basic | Diluted | ||||
Earnings | 490 | 492 | ||||
Net loss | 490 | 490 | ||||
Notes:
1. | Shares outstanding are based upon several estimates and assumptions, including average per share stock price and stock award activity and does not assume any future share repurchases. The number of shares in actual calculations of earnings per share will likely be different from those set forth above. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
GAAP to Non-GAAP Reconciliation
October 26, 2017
The company sometimes uses financial measures that are derived from the consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate its current operating performance and to allow for period-to-period comparisons. The company believes these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. The company is providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. The table below presents the reconciliations of mainline and regional operating costs (GAAP measure) to mainline and regional operating costs excluding special items and fuel (non-GAAP measure). Management uses mainline and regional operating costs excluding special items and fuel to evaluate the company’s current operating performance and for period-to-period comparisons. The price of fuel, over which the company has no control, impacts the comparability of period-to-period financial performance. Additionally, special items may vary from period-to-period in nature and amount. These adjustments to exclude aircraft fuel and special items allow management an additional tool to better understand and analyze the company’s non-fuel costs and core operating performance. Additionally, the table below presents the reconciliation of other non-operating expense (GAAP measure) to other non-operating expense excluding special items (non-GAAP measure). Management uses this non-GAAP financial measure to evaluate the company’s current performance and to allow for period-to-period comparisons. As special items may vary from period-to-period in nature and amount, the adjustment to exclude special items allows management an additional tool to better understand the company’s core performance.
American Airlines Group Inc. GAAP to Non-GAAP Reconciliation ($ mil except ASM and CASM data) | |||||||||||||||||||||||||||
1Q17 | 2Q17 | 3Q17 | 4Q17 Range | FY17 Range | |||||||||||||||||||||||
Actual | Actual | Actual | Low | High | Low | High | |||||||||||||||||||||
Mainline1 | |||||||||||||||||||||||||||
Mainline operating expenses | $ | 7,450 | $ | 7,950 | $ | 7,992 | $ | 7,798 | $ | 7,961 | $ | 30,990 | $ | 31,498 | |||||||||||||
Less mainline fuel expense | 1,402 | 1,510 | 1,570 | 1,568 | 1,611 | 6,050 | 6,093 | ||||||||||||||||||||
Less special items | 119 | 202 | 112 | — | — | 433 | 433 | ||||||||||||||||||||
Mainline operating expense excluding fuel and special items | 5,929 | 6,238 | 6,310 | 6,230 | 6,350 | 24,508 | 24,972 | ||||||||||||||||||||
Mainline CASM (cts) | 13.17 | 12.51 | 12.37 | 13.24 | 13.52 | 12.73 | 12.94 | ||||||||||||||||||||
Mainline CASM excluding fuel and special items (Non-GAAP) (cts) | 10.48 | 9.82 | 9.77 | 10.58 | 10.78 | 10.06 | 10.26 | ||||||||||||||||||||
Mainline ASMs (bil) | 56.6 | 63.5 | 64.6 | 58.9 | 58.9 | 243.5 | 243.5 | ||||||||||||||||||||
Regional1 | |||||||||||||||||||||||||||
Regional operating expenses | $ | 1,573 | $ | 1,620 | $ | 1,654 | $ | 1,653 | $ | 1,688 | $ | 6,474 | $ | 6,585 | |||||||||||||
Less regional fuel expense | 318 | 329 | 352 | 367 | 376 | 1,366 | 1,375 | ||||||||||||||||||||
Less special items | 2 | 1 | (5 | ) | — | — | (2 | ) | (2 | ) | |||||||||||||||||
Regional operating expenses excluding fuel and special items | 1,253 | 1,290 | 1,307 | 1,286 | 1,311 | 5,110 | 5,211 | ||||||||||||||||||||
Regional CASM (cts) | 20.23 | 19.71 | 19.53 | 20.38 | 20.81 | 19.87 | 20.21 | ||||||||||||||||||||
Regional CASM excluding fuel and special items (Non-GAAP) (cts) | 16.10 | 15.69 | 15.44 | 15.86 | 16.17 | 15.69 | 16.00 | ||||||||||||||||||||
Regional ASMs (bil) | 7.78 | 8.22 | 8.47 | 8.11 | 8.11 | 32.58 | 32.58 | ||||||||||||||||||||
Other non-operating (income)/expense1 | |||||||||||||||||||||||||||
Other non-operating (income)/expense | $ | — | $ | 5 | $ | (13 | ) | $ | (3 | ) | $ | (3 | ) | $ | (11 | ) | $ | (11 | ) | ||||||||
Less special items | 5 | 2 | 3 | — | — | 10 | 10 | ||||||||||||||||||||
Other non-operating (income)/expense excluding special items | (5 | ) | 3 | (16 | ) | (3 | ) | (3 | ) | (22 | ) | (22 | ) | ||||||||||||||
Notes: | Amounts may not recalculate due to rounding. |
1. | Certain of the guidance provided excludes special items. The company is unable to fully reconcile such forward-looking guidance to the corresponding GAAP measure because the full nature and amount of the special items cannot be determined at this time. Special items for this period may include merger integration expenses and fleet restructuring expenses. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Forward Looking Statements
October 26, 2017
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about future financial and operating results, the company’s plans, objectives, estimates, expectations and intentions, and other statements that are not historical facts. These forward-looking statements are based on the company’s current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 (especially in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A. Risk Factors) and other risks and uncertainties listed from time to time in the company’s other filings with the Securities and Exchange Commission. There may be other factors of which the company is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. The company does not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements.
Please refer to the footnotes and the forward looking statements page of this document for additional information