American Airlines Group’s total revenue passenger miles (RPMs) for the month were 16.8 billion, down 2.8 percent versus January 2014. Total capacity was 21.5 billion available seat miles (ASMs), down 0.2 percent versus January 2014. Total passenger load factor was 78.2 percent for the month of January, down 2.1 percentage points versus January 2014.
Based on one month of actual data and two months of forecast, the Company continues to expect its first quarter 2015 consolidated passenger revenue per available seat mile (PRASM) to be down approximately two percent to four percent. Due to the recent rise in fuel prices, the Company is currently forecasting its first quarter fuel price to be approximately 10 cents higher than its previous guidance. The Company’s current estimate for first quarter fuel price is $1.81 to $1.86 per gallon versus its previous estimate of $1.71 to $1.76 per gallon. As a result, the Company now expects its first quarter pretax margin excluding special items to be approximately 12 percent to 14 percent versus its previous guidance of 13 percent to 15 percent.
Copyright Photo: Ton Jochems/AirlinersGallery.com. US Airways continues to repaint its fleet in the 2013 American Airlines livery as it moves toward a single operating Part 121 certificate. US Airways’ Boeing 757-23N N205UW (msn 30887) taxies at Amsterdam.
American Airlines-US Airways aircraft slide show (repainted aircraft only):
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) flight attendants will now have a joint collective bargaining agreement and contract. The dispute went to arbitration and the arbitration board issued its decision.
The Association of Professional Flight Attendants (APFA) issued this statement about the decision:
On December 13, the seven member Arbitration Panel, established in accordance with the Negotiations Protocol Agreement, issued its decision on the terms of the Joint Collective Bargaining Agreement. The JCBA will consist of the pay, work rules, and benefits outlined in the APFA arbitration proposal. Unfortunately, the award does not include the “me too” clauses for health plans and profit sharing for which APFA argued. The award also does not provide retroactive pay raises for Flight Attendants. APFA had argued for the wage increases to take effect December 2, 2014. Instead, the increases will take effect on January 1, 2015. The effective date of the JCBA is December 13, 2014.
First, APFA proposed that the value of $112 million is the amount that the arbitrators must add to our combined contracts to equal market based in the aggregate, which is the standard provided for in the NPA. AA stipulated to this value.
Second, APFA argued for a “me too” for health insurance, meaning that if the company were to offer another work group health insurance that differs from the health insurance in our JCBA, APFA would have the option of replacing our current insurance with such other health insurance beginning the following year. The company argued against a “me too” for health insurance.
Third, APFA argued for a “me too” for profit sharing, meaning that if another workgroup on AA’s property were given a profit sharing plan, APFA would have the option of reducing the wage rates by $50 million per year (the value allotted for profit sharing in our proposal) and adopting such profit sharing plan. The company argued against a “me too” for Profit Sharing.
Finally, APFA asked for pay rates retroactive to December 2, 2014. The company argued against retroactive pay rates.
A majority of the Panel denied APFA’s request that the JCBA contain “me-toos” regarding the medical plan and profit sharing. In both cases the Panel found that the inclusion of these provisions would push the added value of the JCBA beyond the market-based aggregate of $112 million.
A majority of the Panel also rejected APFA’s argument that the new wage rates of the JCBA be retroactive to December 2, 2014. It held that starting the pay increases prior to the effective date of the JCBA would result in its value exceeding the $112 million cap.
The two union-appointed members of the Arbitration Panel dissented from the Panel’s decision denying the “me-toos” and the retroactivity of the new wage rates.
The effective date of the JCBA is December 13, 2014, the day the decision was issued. A link to the updated contract language including the implementation letter will be uploaded to apfa.org in the next several days. The new pay rates will go into effect on January 1, 2015.
In other news, American Airlines issued this statement today about a mileage promotion:
American Airlines will reward its customers with a bonus mile promotion in 2015, making the AAdvantage program the most generous in the industry. The promotion will offer AAdvantage® and Dividend Miles® members more miles based on the distance flown, the fare purchased and the member’s elite status level.
President, AAdvantage Loyalty Program Suzanne Rubin said: “As the largest airline in the world, with a global network that spans 54 countries, our frequent flyer program must also be the best in the business. A mile flown continues to be a mile earned in AAdvantage, and now we’re going to reward customers even more when they purchase a First or Business Class ticket.”
Beginning January 1, 2015 American will reward customers that are members of either the AAdvantage or Dividend Miles programs with bonus miles for purchased First or Business Class tickets on all eligible flights marketed or operated by American or US Airways. The promotion applies to all travel between Jan. 1 and Dec. 31, 2015.
Eligible flights for AAdvantage members include all AA and US-marketed and operated flights (including codeshare flights between the two carriers), and AA or US-marketed, partner-operated flights, including British Airways, Iberia, Finnair, Japan Airlines and Qantas. Until the company merges the frequent flyer programs in the second quarter 2015, eligible flights for Dividend Miles members will include all AA and US-marketed and operated flights (including codeshare flights between the two carriers).
The airline’s promotion provides bonus miles in addition to base mileage and elite status/class of service bonuses that customers normally earn. The amount of bonus miles earned will depend on the customer’s elite status level and the length of the flight.
Registration for the promotion is not necessary, as all bonus miles will be automatically added to members’ accounts after the eligible flight is complete. Additional details about the 2015 AAdvantage bonus mile offer are available at aa.com/moremiles.
As previously announced, also beginning January 1, bonus miles for AAdvantage members on Business Class tickets on American and US Airways will increase from 25 to 50 percent to align with what Dividend Miles members receive today.
Over the past year, American has rolled out enhanced benefits to members flying on either airline, including:
The opportunity to earn and redeem miles on American or US Airways, with all eligible travel on either airline counting toward elite status qualification in the program of that member’s choice
Reciprocal benefits for elite status members when flying either airline, including First and Business Class check-in, complimentary checked bags and priority security and boarding
More lounge access, with reciprocal club access for Admirals Club® and US Airways Club members
Easy access to the combined company’s expanded network through the codeshare between American and US Airways, which allows the ability to sell seats on both airlines’ flights
Bringing US Airways into the award-winning oneworld® alliance, offering more options across the Atlantic and an easier and more rewarding global travel experience to Europe and beyond
The ability to easily stay connected while customers fly with Monthly Traveler and Daily Wi-Fi passes, valid on both American and US Airways
Copyright Photo: Ton Jochems/AirlinersGallery.com. US Airways’ Boeing 757-23N N204UW (msn 30886), now in American colors, exits the runway at Amsterdam.
American Airlines (Dallas/Fort Worth) is planning to shift US Airways‘ Edinburgh-Philadelphia route next summer to an Edinburgh-New York (JFK) routing according to the Scotsman city American sources. AA will operate the seasonal flight between May and September.
Copyright Photo: Karl Cornil/AirlinersGallery.com. US Airways’ Boeing 757-23N N203UW (msn 30548) in American colors departs from Brussels.
Third quarter 2014 net profit, excluding net special charges, was a record $1.2 billion, up 59 percent versus the third quarter 2013
Third quarter 2014 GAAP net profit was $942 million, a record for any quarter in the history of American Airlines
Returned $185 million to shareholders through the payment of $72 million in quarterly dividends and the repurchase of $113 million of common stock through the Company’s stock repurchase program
Declared a dividend of $0.10 per share to be paid on November 17, 2014 to shareholders of record as of November 3, 2014
For the third quarter 2014, American Airlines Group reported a record GAAP net profit of $942 million. This compares to a GAAP net profit of $289 million in the third quarter 2013 for AMR Corporation prior to the merger.
The Company believes it is more meaningful to compare year-over-year results for American Airlines and US Airways excluding special charges and on a combined basis, which is a non-GAAP formulation that combines the results for AMR Corporation and US Airways Group. On this basis, third quarter 2014 net profit excluding net special charges was a record $1.2 billion, or $1.66 per diluted share. This represents a 59 percent improvement over the combined non-GAAP net profit of $771 million excluding net special charges for the same period in 2013. The Company’s third quarter 2014 pretax margin excluding net special charges was 11 percent. See the accompanying notes in the Financial Tables section of this press release for further explanation of this presentation, including a reconciliation of GAAP to non-GAAP financial information.
“We are very pleased to have reported a record profit for each quarter so far in 2014,” said Chairman and CEO Doug Parker. “We anticipate we will also post a record profit for both the fourth quarter and full year 2014. This performance reflects the strength of our merger and the commitment of our team. Our over 100,000 team members are doing an excellent job of integrating our airlines and providing outstanding service to our customers. While some of the biggest tasks in our integration still lie before us, the significant accomplishments to date reinforce our confidence that we are well on our way to restoring American as the world’s greatest airline. Thanks to our team, American is in excellent position for success in 2015 and beyond.”
Revenue and Cost Comparisons
Total revenues in the third quarter were a record $11.1 billion, an increase of 4.4 percent versus the third quarter 2013 on a combined basis, on a 2.0 percent increase in total available seat miles (ASMs). Consolidated passenger revenue per ASM (PRASM) was a record at 14.12 cents, up 1.0 percent versus the third quarter 2013 on a combined basis, driven by a record yield of 16.93 cents, up 2.6 percent year-over-year.
Total operating expenses in the third quarter were $9.9 billion, an increase of 3.5 percent over combined third quarter 2013. Third quarter mainline cost per available seat mile (CASM) was 13.28 cents, up 1.3 percent on a 2.1 percent increase in mainline ASMs versus combined third quarter 2013. Excluding special charges and fuel, mainline CASM was up 0.7 percent compared to the combined third quarter 2013, at 8.35 cents. Regional CASM excluding special charges and fuel was 15.52 cents, up 3.7 percent on a 1.0 percent increase in regional ASMs versus combined third quarter 2013.
Liquidity and Financing Transactions
At September 30, 2014, American had approximately $8.8 billion in total cash and short-term investments, of which $875 million was restricted. The Company also had an undrawn revolving credit facility of $1.0 billion.
During the third quarter, the Company Issued $957 million principal amount of 2014-1 Enhanced Equipment Trust Certificates (EETC) at a blended interest rate of 3.8 percent and issued $750 million principal amount of 5.5 percent senior unsecured notes due in 2019.
Also in the third quarter, the Company returned $185 million to its shareholders through the payment of $72 million in quarterly dividends and the repurchase of $113 million of common stock, or 2.9 million shares. The Company also purchased approximately 432,000 shares from its Disputed Claims Reserve at the prevailing market price to satisfy certain tax obligations resulting from the July 1, 2014, distribution.
As of September 30, 2014, $721 million of the Company’s unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable exchange rate of 6.41 bolivars to the dollar. The Company’s cash balance held in Venezuelan bolivars decreased $70 million from the June 30, 2014, balance of $791 million, due primarily to $48 million in repatriations in the third quarter of 2014 ($31 million valued at 6.3 bolivars to the dollar and $17 million valued at 10.6 bolivars to the dollar). This balance also reflects the Company’s significant reduction in capacity in this market, pending further repatriation of funds and due to a decrease in demand for air travel resulting from the effective devaluation of the bolivar. The Company continues to work with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency. The Company is monitoring this situation closely and continues to evaluate its holdings of Venezuelan bolivars for potential impairment.
In early October, the Company arranged a new credit facility consisting of a fully-drawn $750 million term loan that matures in October 2021 and an undrawn $400 million revolving credit facility that matures in October 2019. Collateral for the new credit facility consists of certain slots, gates and route authorities. Also in early October, the Company increased its existing $1 billion revolving credit facility by $400 million and extended its maturity date from June 2018 to October 2019. As a result of these transactions, the Company’s undrawn revolving credit facility is now $1.8 billion.
On October 22, the Company’s Board of Directors declared a dividend of $0.10 per share for shareholders of record as of November 3, 2014. The dividend will be paid on November 17, 2014.
Merger Integration Developments
Reached a tentative agreement with the Association of Professional Flight Attendants on a joint collective bargaining agreement covering more than 24,000 flight attendants at American and US Airways. This agreement is pending ratification by the flight attendants
Recalibrated the schedule at our Miami hub to increase the number of available connections and optimize revenue
Combined operations at 82 airports since the merger, including the Company’s hub at Chicago O’Hare
Broke ground on our new state of the art Robert W. Baker Integrated Operations Center in Fort Worth, with completion planned for the third quarter of 2015
American flight attendants began exclusively using an electronic flight attendant manual on a handheld tablet, making the documents easier to access for flight attendants and reducing weight on each aircraft. US Airways flight attendants will begin using eManuals after the two carriers achieve a single operating certificate next year
Rebranded nine Admirals Club® lounges at eight airports, including Ronald Reagan Washington National Airport, Boston Logan Airport, Pittsburgh International Airport, and Tampa International Airport
Fleet and Network Developments
As part of its plan to modernize its fleet, the Company took delivery of 22 new mainline aircraft during the third quarter
US Airways became fully integrated in the trans-Atlantic joint business by launching a codeshare agreement with Finnair, providing customers increased access to Helsinki and beyond
Applied for new international service between Dallas/Fort Worth and Beijing. This will be the Company’s 11th route between the U.S. and Asia
In the third quarter, the Company recognized a total of $281 million in net special charges, including:
$223 million net special operating charges, which principally included $168 million of mainline and regional merger integration expenses and an $81 million charge to revise prior estimates of certain aircraft residual values. These charges were offset, in part, by a net $40 million credit for bankruptcy related items consisting of fair value adjustments for bankruptcy settlement obligations
$50 million of nonoperating items, primarily due to early debt extinguishment costs related to American’s 7.5 percent senior secured notes and other debt
$8 million in non-cash deferred income tax provision related to certain indefinite-lived intangible assets
Copyright Photo: Jay Selman/AirlinersGallery.com. US Airways is now repainting its fleet, including the older Boeing 757-200s. Boeing 757-23N N203UW (msn 30548) taxies at the Charlotte hub.