Transportation
American Airlines Earnings Hit Afterburner on Lower Fuel Costs
Published:
Last Updated:
On a GAAP basis, EPS came in at $1.30 and included one-time charges of $223 for merger-related expenses, $99 million related to its agreement with the pilot’s union and $9 million in tax charges. The airline also listed $14 million in net benefits that partially offset these charges.
While core demand remains healthy, in the first quarter of 2015 American ran into three revenue headwinds: competitive capacity growth, a stronger U.S. dollar and economic softness in Latin America. Consolidated passenger revenue per available seat mile was $0.1344, down 1.7% from the first quarter of 2014. Consolidated passenger yield was $0.1682, down 1.2% year-over-year.
ALSO READ: Deutsche Bank’s 4 Airline Stocks to Buy With Big Upside Potential
Operating expenses in the first quarter totaled $8.6 billion, a decrease of 7.1% compared with the first quarter 2014 due primarily to a 42.2% decrease in consolidated fuel expense. First-quarter mainline cost per available seat mile (CASM) was $0.128, down 5.2% on a 1.7% decrease in mainline ASMs from the first quarter of last year. Excluding special charges and fuel, mainline CASM was $0.949, up 5.8% compared with the year-ago quarter.
Also in the first quarter, American returned $260 million to its shareholders by way of $70 million in quarterly dividends and the repurchase of $190 million of common stock, or 3.8 million shares, at an average price of $49.47 per share. The airline paid a quarterly dividend of $0.10 per share.
In January it accepted delivery of its first Boeing 787 Dreamliner. The aircraft, a 787-8, is the first of 42 Dreamliners that American ordered in February of 2013. The order includes 16 of the 787-8s and 26 of the larger 787-9s.
American did not offer guidance in its announcement, but the consensus analysts’ estimates for the second quarter call for EPS of $3.24 on revenues of $11.30. For the full year, analysts are looking for EPS of $10.43 on revenues of $42.96 billion.
Softness in demand was more than offset by a drop of nearly 50% in fuel costs. That makes the company’s executives look like geniuses. Regardless, shareholders likely will bid the shares up after this report.
American’s shares closed at $51.45 on Thursday, in a 52-week range of $28.10 to $56.20. The stock traded up about 1% in Friday’s premarket to $51.95. The consensus price target from Thomson Reuters was around $68.10 before this earnings report.
ALSO READ: How Spirit Airlines Makes Money While Being Hated
Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply
clicking here you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.