Tag Archives: 737800

Alaska Air Group achieves second quarter net income of $104 million

Alaska Air Group, Inc. (Alaska Airlines and Horizon Air – Alaska Horizon) (Seattle/Tacoma) today reported second quarter 2013 GAAP net income of $104 million, or $1.47 per diluted share, compared to $68 million, or $0.93 per diluted share in the second quarter of 2012. Excluding the impact of mark-to-market fuel hedge adjustments of $1 million, the company reported adjusted net income of $105 million, or $1.47 per diluted share, compared to adjusted net income of $111 million, or $1.53 per diluted share, in 2012.

“These results represent our 17th consecutive quarter of profitability and the second-best June quarter in our history. I want to thank our employees at Alaska and Horizon who are continuing to work hard to keep us safe and reliable, provide a great experience for our customers, and produce results that make Alaska a great place to invest,” CEO Brad Tilden said. “Although our quarterly results were down slightly, our financial performance continues to be very strong. This is why we were very pleased to recently announce the initiation of a quarterly dividend which, combined with our share repurchases, will be a key component of our capital deployment program.”

The following table reconciles the company’s reported GAAP net income and earnings per diluted share (EPS) during the second quarters of 2013 and 2012 to adjusted amounts:

	Three Months Ended June 30,
	2013				2012
(in millions, except per-share amounts)	Dollars		Diluted EPS		Dollars		Diluted EPS
Reported GAAP net income	$	104	$	1.47	$	68	$	0.93
Mark-to-market fuel hedge adjustments, net of tax	1		—		43		0.60
Non-GAAP adjusted income and per-share amounts	$	105	$	1.47	$	111	$	1.53

Top Copyright Photo: Brian McDonough/AirlinersGallery.com. Banking on its final approach, Alaska Airlines’ Boeing 737-890 N514AS (msn 35193) prepares to straighten up for landing at Washington (Reagan National).

Alaska Airlines:

Horizon Air:

Alaska Horizon:

Bottom Copyright Photo: Bruce Drum/AirlinersGallery.com. Horizon Air’s (Alaska Horizon) Bombardier DHC-8-402 (Q400) N436QX (msn 4236) exits the runway at Seattle-Tacoma International Airport.

Southwest Airlines reports a net profit of $224 million in the second quarter, removes the first AirTran Boeing 717

Southwest Airlines Company (Dallas) today reported its second quarter 2013 results. Second quarter 2013 net income was $224 million, or $.31 per diluted share, which included $50 million (net) of unfavorable special items. This compared to net income of $228 million, or $.30 per diluted share, in second quarter 2012, which included $45 million (net) of unfavorable special items. Excluding special items, second quarter 2013 net income was a record $274 million, or $.38 per diluted share, compared to $273 million, or $.36 per diluted share, in second quarter 2012. This was in line with the First Call consensus estimate of $.38 per diluted share. Additional information regarding special items is included in this release and in the accompanying reconciliation tables.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “We are pleased to report record quarterly earnings of $274 million (excluding special items). This performance benefited from all-time high operating revenues and lower fuel prices. In addition, our focus on managing costs resulted in modest year-over-year cost inflation despite significant investments in fleet modernization and other strategic initiatives. I commend our hard-working and dedicated Employees for their efforts to achieve these excellent results, while simultaneously executing on our strategic initiatives.

“While the lingering effects of government sequestration and higher taxes continued to be a drag on air travel demand, second quarter 2013 revenues and passenger traffic still reached record levels. In addition, we are in the midst of integrating AirTran, launching new city-pairs, and optimizing the combined networks. We maintained strong load factors and ended the quarter with a record June load factor of 85.0 percent, which is notable considering the increasing mix of larger gauge 737-800s and Evolve -700s. Although the 2.4 percent year-over-year decline in second quarter unit revenues was below plan¹, results improved throughout the quarter. Third quarter 2013 revenue trends are encouraging, thus far. To date, July unit revenues are approximately three percent above last year’s July, benefiting from Southwest and AirTran network connections and our gradual combined network optimization. Current bookings for the remainder of the third quarter also look solid.

“We remain on track with our plan to fully integrate AirTran into Southwest Airlines by the end of 2014. We are on schedule to complete the conversion of AirTran’s Boeing 737-700s to the Southwest livery and deploy the Southwest international reservation system next year. During second quarter, we transitioned one -700, bringing total aircraft conversions to 12 since the acquisition. Seven more -700 conversions are planned for this year, with the remaining 33 planned for next year in conjunction with the conversion of AirTran’s eight international markets. We will be transitioning AirTran’s 88 Boeing 717-200s out of the fleet, beginning next month.

“Connecting the Southwest and AirTran networks was a key milestone this quarter. As of April 14, Customers can now fly across our combined 97 destinations on a single itinerary. Our ability to optimize the combined networks and operations is enhanced significantly with connecting capabilities as we continue to transition AirTran markets to the Southwest network. Earlier this week, we extended our 2014 flight schedule through early March and announced new Southwest service between Hartsfield-Jackson Atlanta International Airport and Ronald Reagan Washington National Airport, beginning in February, which will augment AirTran’s five daily nonstop flights. During second quarter 2013, Southwest launched new service to Charlotte, North Carolina; Flint, Michigan; Portland, Maine; Rochester, New York; and Wichita, Kansas, which were all AirTran cities. We also began operating Southwest’s first scheduled service outside of the continental United States, with daily service to San Juan, Puerto Rico, beginning April 14^th. By the end of 2013, we will have a Southwest presence in all AirTran domestic cities retained following the acquisition. While much of the converted capacity represents new city-pairs, we expect these new routes to develop rapidly. Our Cargo business also benefited from connecting the networks, coincident with the April 14^th launch of cargo on AirTran under the Southwest brand.

“We are excited about our future network opportunities as we add international capabilities and continue the development of our domestic route network. We were thrilled to be awarded the slot exemption from the U.S. Department of Transportation to begin service between Houston Hobby and Ronald Reagan Washington National Airport next month. The introduction of this daily Southwest service will complete a triad of nonstop service options between Hobby and the Boston, New York, and Washington, D.C. metro areas.

“We continue to make progress on our fleet modernization efforts. During second quarter, we added three new Boeing 737-800s into service and retired two Boeing 737-300s. We also removed the first AirTran 717 from active service during the quarter in preparation for its transition out of the fleet next month. As of June 30, 2013, all Southwest Boeing 737-700s and 14 Boeing 737-300s have been retrofitted with the Evolve interior, and we plan to retrofit 64 additional -300s in the second half of this year. In May, we announced revisions to our future aircraft delivery schedule, including the launch of the Boeing 737 MAX 7 in 2019, with three objectives in mind: efficiently and aggressively manage our invested capital, shift the mix of new aircraft deliveries to the MAX, and replace Boeing 717s and Boeing 737s being retired over the next three years with more economical aircraft. This includes augmenting our Boeing orders with the acquisition of pre-owned aircraft. In line with our plan, available seat miles (capacity) for 2013 are estimated to increase two percent year-over-year as a result of larger gauge aircraft. For 2014, we currently plan to keep our capacity in line with 2013 as we continue to optimize our network and execute our strategic plan.

“Our fleet modernization and other fuel conservation efforts resulted in a 4.1 percent improvement in second quarter available seat miles per gallon. Second quarter economic fuel costs declined significantly to $3.06 per gallon, as expected, compared to second quarter 2012’s $3.22 per gallon. Based on our fuel derivative contracts and market prices as of July 22, third quarter 2013 economic fuel costs are expected to be in the $3.05 to $3.10 per gallon range, which is below third quarter 2012’s $3.16 per gallon.

“Our second quarter unit costs, excluding fuel, special items, and profitsharing, increased 1.7 percent, compared to second quarter last year. Based on current trends and benefits from our fleet modernization efforts, we expect our third quarter 2013 unit costs, excluding fuel, special items, and profitsharing, to increase slightly from third quarter 2012’s 7.72 cents.

“Our balance sheet and liquidity remain strong with approximately $3.7 billion in cash and short-term investments, as of yesterday, and a $1 billion fully available revolving credit facility. Our second quarter cash flow from operations was $778 million, and capital expenditures were $193 million, resulting in $585 million in free cash flow². Our strong cash flow generation and record second quarter profits (excluding special items) reinforce the Board’s authorizations in May 2013 to increase our stock repurchase program from $1 billion to $1.5 billion, along with quadrupling our quarterly dividend to an estimated 1.2 percent annual yield (based on yesterday’s closing stock price of $13.76). During second quarter 2013, we returned approximately $279 million to our Shareholders through the payment of $28 million in dividends and the repurchase of approximately $251 million, or approximately 18 million shares, under an accelerated stock repurchase program completed in June. Since August 2011, we have repurchased approximately $975 million, or approximately 100 million shares, under our total $1.5 billion share repurchase authorization.”

Financial Results

The Company’s second quarter 2013 total operating revenues increased 0.6 percent to $4.6 billion, while operating unit revenues decreased 2.4 percent, on a 3.0 percent increase in available seat miles, and approximately four percent increase in average seats per trip, all as compared to second quarter 2012. Total operating expenses in second quarter 2013 increased 1.3 percent to $4.2 billion, as compared to second quarter 2012. The Company incurred costs (before taxes) associated with the acquisition and integration of AirTran, which are special items, of $26 million during second quarter 2013, compared to $11 million in second quarter 2012. Cumulative costs associated with the acquisition and integration of AirTran, as of June 30, 2013, totaled $363 million (before profitsharing and taxes). The Company expects total acquisition and integration costs to be no more than $550 million (before profitsharing and taxes). Excluding special items in both periods, total operating expenses in second quarter 2013 were $4.2 billion, compared to $4.1 billion in second quarter 2012.

Second quarter 2013 economic fuel costs were $3.06 per gallon, including $.05 per gallon in unfavorable cash settlements for fuel derivative contracts, compared to $3.22 per gallon in second quarter 2012, including $.04 per gallon in unfavorable cash settlements for fuel derivative contracts. The Company has derivative contracts in place for approximately 80 and 85 percent of its estimated fuel consumption in the third and fourth quarters of 2013, respectively. As of July 22^nd, the fair market value of the Company’s hedge portfolio through 2017 was a net asset of approximately $102 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding fuel, special items, and profitsharing in both periods, second quarter 2013 operating costs increased 0.7 percent from second quarter 2012, and 1.7 percent on a unit basis.

Operating income for second quarter 2013 was $433 million, compared to $460 million in second quarter 2012. Excluding special items, operating income was $479 million for second quarter 2013, compared to $485 million in the same period last year.

Other expenses for second quarter 2013 were $70 million, compared to $92 million in second quarter 2012. This $22 million decrease primarily resulted from $47 million in other losses recognized in second quarter 2013, compared to $62 million in second quarter 2012. In both periods, these losses primarily resulted from unrealized mark-to-market gains/losses associated with a portion of the Company’s fuel hedging portfolio, which are special items. Excluding these special items, other losses were $12 million in second quarter 2013, compared to $14 million in second quarter 2012, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts. Third quarter 2013 premium costs related to fuel derivative contracts are currently estimated to be approximately $22 million, compared to $15 million in third quarter 2012. Net interest expense declined to $23 million in second quarter 2013, compared to $30 million in second quarter 2012, primarily due to the repayment of AirTran aircraft financing facilities during the first quarter of 2013.

For the six months ended June 30, 2013, total operating revenues increased 1.4 percent to $8.7 billion, while total operating expenses increased 1.2 percent to $8.2 billion, resulting in operating income of $503 million, compared to $481 million for the same period last year. Excluding special items, operating income was $591 million for first half 2013, compared to $495 million for first half 2012.

Net income for first half 2013 was $283 million, or $.39 per diluted share, compared to $327 million, or $.43 per diluted share, for the same period last year. Excluding special items, net income for first half 2013 was $328 million, or a record $.45 per diluted share, compared to $255 million, or $.33 per diluted share, for the same period last year.

The Company’s return on invested capital (before taxes and excluding special items) was approximately nine percent for the twelve months ended June 30, 2013. Additional information regarding pre-tax return on invested capital is included in the accompanying reconciliation tables.

For the six months ended June 30, 2013, net cash provided by operations was $1.8 billion, and capital expenditures were $727 million, resulting in free cash flow² in excess of $1 billion. The Company repaid $216 million in debt and capital lease obligations during first half 2013, and intends to repay approximately $100 million more in debt and capital lease obligations during the remainder of the year.

Copyright Photo: Brian McDonough/AirlinersGallery.com. A beautiful banking shot of Boeing 737-8H4 WL N8322X (msn 36997) completing the River Approach into Washington’s Reagan National Airport (please click on the photo for the full-size view).

Southwest Airlines:

Ryanair gives up, will sell its 29% Aer Lingus stake to another EU airline

Ryanair (Dublin) is giving up on taking control of rival Aer Lingus (Dublin). The airline issued this statement:

Ryanair on July 23 confirmed that, as part of its ongoing remedies discussions with the UK Competition Commission (CC) in a case where the CC have produced no evidence whatsoever of any lessening of competition as a result of Ryanair’s 6½ year old 29% shareholding in Aer Lingus, Ryanair has now offered the following undertaking to the CC:

In order to dispel the CC’s unfounded and invented “concern” that Ryanair’s shareholding may prevent Aer Lingus from being acquired by another EU airline, Ryanair will undertake to unconditionally sell its 29% shareholding to any other EU airline that makes an offer for Aer Lingus and obtains acceptances from 50.1% of Aer Lingus shareholders.

The above remedy is without prejudice to Ryanair’s vehement objection to the CC’s manifestly false conclusion that Ryanair has influence over Aer Lingus’ commercial strategy and/or that Ryanair’s 6½ year old minority shareholding in Aer Lingus has resulted in a lessening of competition. This conclusion is flatly contradicted by 6½ years of evidence, by the European Commission’s findings in February 2013 that competition between Ryanair and Aer Lingus has intensified, and by the evidence submitted even by Aer Lingus and the Irish Government (to the EU), which proves that competition between Ryanair and Aer Lingus intensified to the benefit of consumers over the last 6½ years.

Ryanair’s Robin Kiely said:

“It is clear from the CC’s own Provisional Findings report that it has found no evidence of any lessening of competition between Ryanair and Aer Lingus. In fact, Ryanair’s recent (3^rd) offer for Aer Lingus was prohibited by the EU precisely because of the evidence, submitted by both Aer Lingus and the Irish Government, that competition between Ryanair and Aer Lingus has “intensified” during the past 6½ years.

These inconvenient facts have reduced the CC’s Simon Polito (Chairman) and Roger Davis (Member) to inventing new and fantastical “concerns” in order to justify their apparently premeditated and biased “thinking” that Ryanair should be forced to sell down this 6½ year old minority stake. The only remaining “concern” they can now dream up is that Ryanair’s 29% stake “might” prevent another EU airline buying Aer Lingus; despite 6½ years of evidence (and repeated public statements) that no other EU airline has any interest in acquiring Aer Lingus.

In order to remove any remaining shred of credibility from this CC process and eliminate any doubt about this imaginary albeit non-existent “concern”, Ryanair has now agreed that it will unconditionally sell its 6½ year old minority stake to any other EU airline which makes an offer for, and acquires more than 50.1% of, Aer Lingus shares, at the same price and terms which are accepted by these other 50.1% of Aer Lingus shareholders. This remedy unconditionally removes any ability by Ryanair to block any future takeover of Aer Lingus by another EU airline.

This bogus CC “concern” has now been fatally undermined thereby removing any requirement for a divestment of Ryanair’s 6½ year old minority shareholding which even the CC now admits hasn’t given Ryanair any influence, and Aer Lingus admits has led to intensified competition to the benefit of the perhaps 1 or maybe 2 UK consumers who even fly Aer Lingus.”

Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com. Boeing 737-8AS EI-CSE (msn 29920) taxies at the Dublin hub. The airframe has since gone on to Gol as PR-VBE.

Aer Lingus:

Ryanair:

WestJet adds four new winter routes, including Calgary-Miami

WestJet (Calgary) announced today they are adding four new nonstop routes, two new year-round routes and increased frequency on 29 existing routes as part of the 2013-2014 winter schedule. Domestic routes now benefit from enhanced frequency in addition to several popular sun destinations, including Manzanillo and Ixtapa, Mexico, Providenciales, Turks and Caicos, Varadero, Cuba and Hewanorra, St. Lucia.

WestJet Encore adds new nonstop routes to the network with flights between Winnipeg and Saskatoon, Winnipeg and Regina and between Vancouver and Kamloops, British Columbia. WestJet Encore frequency increases on routes between Calgary and Kamloops and routes between Edmonton and Saskatoon, Edmonton and Regina and Edmonton and Grande Prairie, Alberta. The WestJet Encore operated route between Vancouver and Victoria will also increase in frequency for the winter schedule.

Beginning October 27, 2013, WestJet moves from seasonal to daily year-round service between Toronto (Pearson) and Fort McMurray, Alberta and three-time weekly service between Toronto (Pearson) and Deer Lake, Newfoundland. Popular U.S. destinations will also see an increase in service with one new nonstop route between Calgary and Miami and more frequency between Calgary and Phoenix , Calgary and San Diego, Calgary and Orlando, Florida as well as Kelowna to Phoenix .

Details of WestJet Encore’s new non-stop routes are:

Routes	Frequency	Dates
Winnipeg – Saskatoon	Twice daily (Mon – Fri) Once daily (Sat – Sun)	February 15, 2014 – April 26, 2014
Winnipeg – Regina	Twice daily (Mon – Fri) Once daily (Sat – Sun)	January 15, 2013 – April 26, 2014
Vancouver – Kamloops	Daily	November 25, 2013 – April 26 2014

Details of WestJet’s new non-stop Calgary – Miami route is:

Route	Frequency	Dates
Calgary – Miami	Four times weekly (Mon/Thu/Fri/ Sat)	October 28, 2013 – December 14, 2013
Calgary – Miami	Six times weekly (Mon – Sat)	December 16, 2013 – April 26, 2014

WestJet:

Airberlin and Jat Airways begin code sharing on August 1

Airberlin (airberlin.com) (Berlin) and Jat Airways (Belgrade), the national airline of the Republic of Serbia, will offer their passengers selected flights under shared flight numbers, subject to government approvals. The codeshare agreement is valid for flights from August 1, 2013.

Under the agreement, Airberlin will offer the nonstop Jat Airways flights between Belgrade and Berlin, Dusseldorf, Frankfurt and Stuttgart under an AB flight number, thereby expanding their route range in South East Europe.

In return, Jat Airways passengers will be able to connect from Berlin, Dusseldorf, Frankfurt and Stuttgart to numerous Airberlin German domestic flights. From Airberlin’s hub in Berlin there will be further codeshare flights to prime destinations in Northern Europe to cities such as Copenhagen, Oslo and Stockholm.

Top Copyright Photo: Ton Jochems/AirlinersGallery.com. Airberlin’s Boeing 737-86J D-ABMC (msn 37752) in the Oneworld color scheme taxies to the gate at Palma de Mallorca.

Airberlin:

Jat Airways:

Bottom Copyright Photo: Keith Burton/AirlinersGallery.com. Jat Airways’ Boeing 737-3H9 YU-AND (msn 23329) prepares to land at London (Heathrow).

Ryanair calls for three new London runways

Ryanair (Dublin) has issued this statement calling for three new London runways at three airports:

Ryanair, the UK’s only ultra low cost carrier (ULCC) on July 18 made a submission to the UK Government’s Airports Commission, calling on Sir Howard Davies and his team to resolve the 30 year old runway shortage in the South East of England by recommending that each of the three main London airports, Gatwick, Heathrow and Stansted, be allowed to develop, at the earliest possible date, one new additional runway each, which will result in three new runways serving London, which will finally address runway capacity in the South East for the next 50 years, thereby allowing competition between the three airports, to ensure that these new runways are delivered in a timely, efficient and cost competitive manner which will maximize the gains for UK consumers and visitors.

Ryanair in its submission has rubbished any new Greenfield airport plan such as ‘Boris Island’, which it criticized as being more of the failed political interference that has bedevilled UK infrastructure projects over the past 30 years. Ryanair believes that any new greenfield airport will take many decades to deliver, and will result in vast overspending and inefficiency due to the absence of any existing airport or ground transport infrastructure at any such greenfield site.

The approval of three new London runways will prevent the kind of regulatory gaming which has bedevilled London runway capacity under the failed BAA airport monopoly, and the “inadequate” CAA regulatory regime over the past 30 years. This failed airport regulatory model allowed the BAA monopoly to constrain capacity delivery, in order to charge monopoly prices to airlines and consumers, which has done such damage to UK aviation and tourism since the BAA airport monopoly was first privatised in the 1980’s. Ryanair has called on the Airports Commission to adopt its 3 new London runway proposal, which is the timeliest, most efficient long-term solution to the chronic runway shortages currently suffered by all airlines and passengers at the 3 main London airports. This new 3 runway strategy will restore London’s leadership of European aviation – without any political funding – and enable the South East to respond competitively to the new runway developments which have recently been completed in Madrid, Paris and Frankfurt.

Ryanair’s Michael O’Leary said:

“Three new runways at the three competing London airports is the only sensible and consumer focused solution to the chronic runway capacity shortages in London and the South East of England. We cannot wait 30 years and allow billions of pounds to be wasted on ‘Borris Island’. Because each airport and each airline (apart from Ryanair) wants to limit competition, they tend to advocate only one runway solutions and only at their airport. This means that UK aviation will continue to be hand-cuffed by political interference, and “NIMBY” opposition which has stymied aviation policy for the last 30 years. The UK in general and London in particular is being left behind by new runway developments in competitor cities such as Frankfurt, Paris and Madrid.

The failure of recent UK Governments to stand up to misleading environmental groups and their willingness to pander to narrow ‘NIMBY’ interests at individual airports has allowed UK aviation, tourism and job creation to be hijacked by backward looking luddites. Sadly the very appointment of the Davies Commission is just the latest example of the spineless approach of David Cameron’s Government which talks about stimulating growth and job creation, but instead of pursuing growth policies they pander to tree huggers and NIMBYS.

Ryanair believes that the solution to the runway shortage in London is both simple and straightforward. Thanks to the recent break up of the BAA airport monopoly, London now has three competing airports, but no spare runway capacity. Instead of pandering to the expensive lobbyists of Ferrovial and Heathrow, the Davies Commission should recommend that three new runways be developed and allow the marketplace and competition between these three airports to deliver timely, cost efficient and consumer friendly runway capacity growth in the manner that will most benefit UK consumers, UK tourism and UK job creation. These 3 new runways will in turn deliver an additional 100m passengers p.a., which – given Airport Council International figures – will sustain about 100,000 new jobs across the 3 London airports. These 3 new runways will also exploit the advantage of the existing road, rail, underground and coach infrastructure which already serves these London airports, without the waste, delay and inefficiency of trying to develop a new greenfield airports and ground transport to serve them.

Approving 3 new runways at Heathrow, Gatwick and Stansted is also the only way to keep Ferrovial/Heathrow honest as it promotes its plans to waste further billions on inefficient, gold-plated facilities which will allow them to again ‘game’ the CAA’s inadequate regulatory regime to further penalise airlines and passengers at Heathrow, with much higher charges. Competition between the airlines has significantly reduced UK air fares over the past 30 years to such an extent that Ryanair now carries more passengers than British Airways and EasyJet combined. The Davies Commission (while being another example of David Cameron kicking the can down the road) offers a unique opportunity to finally introduce effective competition and excess capacity in London’s runway infrastructure and Ryanair hopes that Sir Howard and his team will seize this historic opportunity.”

Copyright Photo: SM Fitzwilliams Collection. Now gone from the fleet, Boeing 737-8AS EI-CSI (msn 29924) is pictured on final approach to the Dublin base. EI-CSI carried Frankfurt and a German flag to promote its operations at nearby Hahn Airport. EI-CSI has since gone to be with Orenair as VP-BPG.

Ryanair:

AMR Corporation reports a net profit of $357 million in the second quarter

AMR Corporation (American Airlines and American Eagle Airlines) (Dallas/Fort Worth) today issued this financial report:

AMR Corporation, the parent company of American Airlines, Inc., today reported results for the second quarter ended June 30, 2013. Key highlights include:

Consolidated and mainline passenger revenue of $5.6 billion and $4.9 billion, respectively – highest passenger revenue for the second quarter in company history
Net profit of $357 million, excluding reorganization and special items, a $262 million improvement year-over-year
Operating profit of $502 million, excluding special items, a $254 million improvement over second quarter 2012. GAAP operating profit of $489 million, a $347 million improvement year-over-year
Consolidated unit costs, excluding fuel and special items, improved 5.8 percent year-over-year, marking the third consecutive quarter of unit cost reduction on that basis
American continued its fleet renewal and took delivery of nine fuel-efficient Boeing 737-800s and three 777-300ERs in the quarter. For the year, the company has taken delivery of 24 new aircraft, including six 777-300ERs
American and US Airways continue to anticipate closing their merger in the third quarter of 2013

In the second quarter of 2013, GAAP net profit was $220 million, a $461 million improvement compared to the prior-year period. Excluding reorganization and special items, second quarter 2013 net profit was $357 million, a $262 million improvement compared to the prior-year period. This record setting quarterly result was bolstered by a June during which the company recorded its best monthly profit, excluding reorganization and special items, in its history. In the quarter, AMR had $137 million of reorganization and special items, which are detailed below.

Financial Progress

AMR continues to execute on its objectives as it nears the completion of its restructuring efforts and prepares for its merger with US Airways. With many financial and operating changes from its restructuring already in place, it expects to realize additional improvements as the company continues to implement new terms negotiated with certain vendors and suppliers. It also plans to compete more effectively in the future when American expects to introduce larger regional jets into the operation, which will enable it to better match aircraft size with demand in certain markets.

In the second quarter of 2013, AMR strengthened its liquidity and reduced interest rates through several key transactions. It closed on a $1.05 billion term loan and a $1 billion revolving credit facility. The revolving credit facility will be available upon emergence from its restructuring. AMR also completed a private offering of approximately $120 million of enhanced equipment trust certificates and received gross proceeds of approximately $216 million from the re-marketing of tax-exempt bonds related to its Tulsa maintenance base.

AMR realized year-over-year cost improvements across its business, excluding fuel. Furthermore, to position the company for the future, American is in the midst of a significant renewal and transformation of its fleet and has taken delivery of 42 new fuel efficient Boeing 737-800 and 777-300 ER aircraft over the past 12 months. During the full year of 2013, American expects to take delivery of 59 new mainline aircraft.

In one of the most effective major corporate restructurings ever, AMR’s proposed Plan of Reorganization provides the potential for full recovery for American’s unsecured creditors and a recovery of at least 3.5 percent of the aggregate diluted common stock of the combined airline for the company’s existing shareholders.

Revenue Performance

For the second quarter of 2013, AMR reported consolidated revenue of approximately $6.4 billion, comparable with AMR’s record-setting consolidated revenue results in the same period last year. Consolidated and mainline passenger revenue in the second quarter of 2013 was the highest second quarter passenger revenue result in company history. Respectively, they increased 0.2 percent to $5.6 billion and 1.1 percent to $4.9 billion, compared to the second quarter of 2012.

Second quarter 2013 consolidated and mainline capacity were both up approximately 1.1 percent year-over-over, while consolidated and mainline passenger revenue per available seat mile (PRASM) were lower by 0.9 percent and 0.1 percent, respectively.

While a decrease in close-in demand was observed beginning in March, actions taken in the second quarter to maintain load factor resulted in sequential PRASM improvement throughout the quarter.

American’s mainline load factor, or the percentage of total seats filled, was 84.8 percent during the second quarter, compared to 85.1 percent in the second quarter of 2012. Mainline passenger yield, which represents the average fares paid, increased 0.2 percent year-over-year.

Despite revenue headwinds and against the backdrop of a sluggish economy, AMR was able to drive profitability and significant margin expansion in the second quarter.

Operating Expense

For the second quarter, AMR’s consolidated operating expenses decreased $350 million, or 5.5 percent, versus the same period in 2012. AMR’s mainline and consolidated cost per available seat mile (unit cost) in the second quarter decreased 7.5 percent and 6.6 percent, respectively. Excludingspecial items, AMR’s consolidated operating expenses decreased $257 million, or 4.1 percent, year-over-year.

Taking into account the impact of fuel hedging, AMR paid $3.02 per gallon for jet fuel in the second quarter of 2013 versus $3.24 per gallon in the second quarter of 2012, a 6.8 percent decrease. The company paid $70 million less for fuel in the second quarter of 2013 than it did in the prior-year period.

Excluding fuel and special items, mainline and consolidated unit costs in the second quarter of 2013 decreased 6.5 percent and 5.8 percent year-over-year, respectively, primarily driven by the company’s restructuring efforts. This was the third consecutive quarter of non-fuel unit cost reduction.

In addition, AMR achieved an operating profit of $502 million and an operating margin of approximately 7.8 percent, an improvement of approximately $254 million and 3.9 points, respectively, over the prior-year period, excluding special items in both periods. On a GAAP basis, AMR realized an operating profit of $489 million and an operating margin of approximately 7.6 percent, an improvement of approximately $347 million and 5.4 points, respectively, over the prior-year period.

An unaudited summary of second quarter 2013 results, including reconciliations of non-GAAP to GAAP financial measures, is available in the tables at the back of this press release.

Cash Position

The company ended the second quarter with approximately $7.1 billion in cash and short-term investments, including a restricted cash balance of $863 million, compared to a balance of approximately $5.8 billion in cash and short-term investments, including a restricted balance of approximately $772 million, at the end of the second quarter of 2012.

Total cash and short-term investments increased approximately $2.0 billion from the first quarter ended 2013. Approximately $1.2 billion of the increase in cash and short-term investments was generated from operating activities, while the balance was significantly bolstered by the financing activities described above.

Pending Merger with US Airways

American and US Airways made significant progress toward planning for the closing of the merger and integrating the two airlines. Led by the Integration Management Office (IMO), integration planning teams and cross-functional task forces are defining the manner in which the two companies will combine their commercial, customer service, operations and corporate functions after the merger closes. During the quarter, the IMO held two Merger Planning Summits.

The following merger milestones were achieved in the second quarter:

April 2-3: Integration Planning Kickoff — 29 planning teams comprised of leaders from both airlines to plan the integration
May 6: IMO Planning Summit – IMO team met to conduct planning activities required for merger close and beyond
May 10: The bankruptcy court presiding over American’s restructuring entered an order approving the merger with US Airways, subject to confirmation and consummation of American’s Plan of Reorganization (the Plan)
June 10: American and US Airways announced the Board of Directors and senior leadership team responsible for guiding the combined company, American Airlines Group Inc., effective upon the closing of the merger
June 10: The Securities and Exchange Commission (SEC) Form S-4 Registration Statement was declared effective by the SEC, which gave US Airways shareholders the opportunity to review the proxy statement included in the Form S-4 and vote on the proposed merger at the US Airways annual shareholder meeting on July 12, 2013
June 19: American and US Airways jointly testified before the Senate Subcommittee on Aviation, Operations, Safety, and Security that the new American Airlines will be a stronger, more competitive airline that will provide significant benefits to customers, employees, financial stakeholders and communities of both airlines
June 27- 28: IMO Master Planning Summit — Individual teams met to review planning progress and establish the master plan for the overall integration
July 12: US Airways shareholders, at their annual shareholders meeting, overwhelmingly approved the merger agreement with AMR

The merger is conditioned on approval by regulatory authorities, expiration of statutory waiting periods, other customary closing conditions, and confirmation and consummation of the Plan in accordance with the provisions of the Bankruptcy Code. The combination is expected to be completed in the third quarter of 2013.

Recent Business Highlights

American continued to generate positive momentum throughout its business, while preparing for emergence from restructuring and its pending merger with US Airways. Recent highlights include:

American strengthened its expanding global network by launching or announcing new service from its hubs to international destinations, including Miami-Milan; New York (JFK)-Dublin; Dallas/Fort Worth-Seoul, South Korea; Chicago O’Hare-Düsseldorf, Germany; DFW-Lima, Peru; and Miami and the Caribbean (Martinique and Guadeloupe).
- Additionally, American significantly enhanced its service from Los Angeles International Airport (LAX) by launching or announcing nine new destinations, including new daily non-stop service from LAX to Sao Paulo beginning on Nov. 21.
- On July 1, American, British Airways and Iberia welcomed Finnair to the Atlantic Joint Business.
The American Airlines AAdvantage Program was named Airline Program of the Year at the 2013 Freddie Awards.
The new American Airlines identity received a 2013 bronze CLIO award for best corporate identity design.
American Airlines Cargo was named the Best Cargo Airline of the Americas for the sixth consecutive year by readers of Air Cargo News, the world’s leading air cargo industry publication.
American opened its Flagship Check-In for premium customers at JFK. This is American’s third airport offering the expedited and personalized check-in experience. Chicago’s O’Hare airport will open its Flagship Check-In today, making it American’s fourth airport to offer this enhanced customer experience.
In June, American completed the successful rollout of its industry-leading Electronic Flight Bag program with the discontinuation of paper revisions to terminal charts, making it the first major commercial airline to fully utilize tablets in all cockpits during all phases of flight.

Restructuring Progress

On June 7, 2013, the Court presiding over the Company’s Chapter 11 cases entered an order approving American’s Disclosure Statement and authorized the company to begin soliciting approval of the Plan from AMR’s creditors and stockholders. The Plan voting deadline is July 29, 2013.

The hearing before the Court to consider confirmation of the Plan is scheduled for Aug. 15, 2013. The effective date of the Plan and American’s emergence from restructuring are expected to occur simultaneously with the closing of the merger with US Airways. American and US Airways continue to expect to close their merger in the third quarter of 2013.

Reorganization and Special Items

AMR’s second quarter 2013 results include the impact of $137 million in reorganization and special items.

Of that amount, AMR recognized a $124 million loss in reorganization items resulting from certain of its direct and indirect U.S. subsidiaries’ voluntary petitions for reorganization under Chapter 11 on Nov. 29, 2011. These items primarily consist of estimated allowed claim amounts for certain special facility revenue bonds as well as for professional fees.
The company’s operating expenses for the second quarter also include special charges and merger-related expenses of $13 million.

Capacity Guidance

AMR estimates consolidated capacity in the third quarter of 2013 to be up approximately 2.7 percent versus the third quarter of 2012, driven by the combination of a longer average stage length per operation flown, and by new or increased capacity into South Korea, Mexico, Central and South America. For the full year 2013, consolidated capacity is estimated to increase approximately 1.5 percent versus the prior year. This guidance is for independent AMR Corporation and does not include US Airways.

American continues to make progress in implementing Main Cabin Extra, providing customers with more leg room in the Main Cabin. To date, American has completed the retrofit of its MD-80, Boeing 757, 767 fleets and 95 percent of its 737 fleet.

American Airlines:

American Eagle:

Ukraine International expands its fleet and route structure

Ukraine International Airlines (UIA) (Kiev) is expanding its fleet and route structure. In June the flag carrier leased two additional Boeing 737-800s (UR-PSG and UR-PSH). The fleet is now composed of 28 Boeing aircraft and two leased Embraer ERJ 190s.

As a result, the airline is adding new routes. On June 29, a weekly Lvov-Rome route was launched. This was followed by a new route linking Kiev with Sochi, Russia. The new route will operate three days a week. The 2014 Winter Olympics will be held in Sochi.

The Sochi route was followed by a new route from Simferopol to Tel Aviv, Israel which started on July 4. The Israeli route will operate two days a week.

Finally a new weekly route was started between Simferopol and Yerevan, Armenia.

Copyright Photo: Paul Denton/AirlinersGallery.com (all others by UIA). Boeing 737-8HX UR-PSB (msn 29654) prepares to land at Antalya, Turkey.

Ukraine International Airlines:

Route Map: CLICK HERE

ILFC delivers a new Boeing 737-800 to Okay Airways

International Lease Finance Corporation (ILFC) (Los Angeles), a wholly owned subsidiary of American International Group, Inc. (AIG), has announced the delivery of a new Boeing 737-800 to Okay Airways Company Limited (Okay Airways) (OKAir) (Tianjin), which will allow the airline to expand services to meet the growing demand within its flight route network.

The newly-delivered Boeing 737-8Q8 B-5841 (msn 41789) is powered by two CFM 56-7B26E engines and will operate on the airline’s routes linking Tianjin with other major cities in China.

In other news, ILFC has announced today that it has finalized an order for the purchase of 50 E-Jets E2 aircraft from Embraer, including 25 E190-E2 and 25 E195-E2. The order also includes options for an additional 50 aircraft.

OKAir (Okay Airways):

United Airlines launches weekly service to St. Lucia

United Airlines (Chicago) has launched weekly nonstop service to St. Lucia from its Newark Liberty International Airport hub. The flights, which began on July 13, 2013, operate using Boeing 737-800 aircraft, with 16 United Business seats, 48 United Economy Plus seats and 90 United Economy seats.

United flight UA 1642 departs Newark Liberty (EWR) on Saturdays at 8:55 a.m. (0855), arriving at the Hewanorra International Airport (UVF) in St. Lucia at 1:48 p.m. (1348). The return flight, United UA 1643, departs St. Lucia on Saturdays at 2:38 p.m. (1438), arriving in Newark at 7:33 p.m. (1933). The service provides convenient connections to and from 22 cities in the United States, including Chicago, Boston and Washington, as well as several Canadian cities.

St. Lucia, United’s 17^th destination in the Caribbean.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Boeing 737-824 N77261 (msn 31582) departs from Los Angeles International Airport.

United Airlines: