Tag Archives: AMR Corporation

American Airlines Group reports a record first quarter net profit of $480 million

American Airlines Group (American Airlines and US Airways) (Dallas/Fort Worth) today reported its first quarter 2014 results.

First quarter 2014 net profit was a record $480 million. This represents a $777 million improvement versus the company’s combined first quarter 2013 net loss of $297 million.

Excluding net special credits, the company reported a record first quarter net profit of $402 million. This represents a $340 million year-over-year improvement versus the company’s combined net profit of $62 million excluding net special charges in the first quarter 2013.

First quarter 2014 pretax margin excluding net special credits was 4.1 percent, a 3.6 point year-over-year improvement.

The company ended the quarter with $10.6 billion in total cash and short-term investments. Since the close of the merger, the company has used more than $542 million of cash to reduce its diluted shares outstanding by approximately 20 million.

For the first quarter 2014, American Airlines Group reported a record GAAP net profit of $480 million. This compares to a net loss of $341 million in the first quarter 2013. The company’s GAAP results for the first quarter 2013 reflect 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 on a combined basis, which is a non-GAAP formulation that combines the results for AMR Corporation and US Airways Group. Therefore, it includes the results of US Airways Group for the full period. 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.

First quarter 2014 net profit excluding net special credits was a record $402 million. This compares to a combined non-GAAP net profit of $62 million excluding net special charges for the same period in 2013. Excluding net special credits, first quarter 2014 diluted earnings per share was $0.54.

“We are very pleased to report a record profit in our first full quarter as a merged company,” said Doug Parker, CEO of American Airlines Group. “Our team of dedicated professionals did an excellent job of taking care of our customers despite particularly difficult weather conditions throughout the quarter. We are excited for the future and expect our synergies to build as we continue to integrate our operations.”

Merger Integration

Since closing the merger on December 9, 2013, the company has made significant progress in integrating American Airlines and US Airways. Key accomplishments:

Launched the world’s largest codeshare, offering customers improved access to the company’s global network by allowing them to book flights on both airlines’ networks

Provided reciprocal benefits for airport lounge and frequent flyer elite members, including priority check-in, waiving fees for checked bags, complimentary access to preferred seats, priority security lines, early boarding and priority baggage delivery

Enabled AAdvantage® and Dividend Miles® members to earn and redeem miles when traveling across either airline’s network

Joined operations at 58 airports, including Phoenix and Miami hubs

Moved US Airways into the oneworld alliance on March 31 and to the trans-Atlantic joint venture with American, British Airways, Iberia and Finnair on April 3

Aligned award travel options, checked baggage policies and inflight services for First and Business Class customers

Announced Sabre as the new Passenger Services System for the combined company

Closed the sale of the slot divestitures required by the U.S. Department of Justice at Ronald Reagan Washington National Airport (DCA). In total, the company received $381 million in cash from the DCA sales and the sale of slots at New York’s LaGuardia (LGA) Airport, which closed in the fourth quarter 2013.

Revenue and Cost Comparisons

On a combined basis, total revenues in the first quarter were a record $10 billion, up 5.6 percent versus the first quarter 2013 on a 2.0 percent increase in total available seat miles (ASMs). Driven by a record yield of 17.03 cents, up 3.2 percent year-over-year, combined consolidated passenger revenue per ASM (PRASM) was also a record for the first quarter at 13.67 cents, up 2.9 percent versus the first quarter 2013.

Total combined operating expenses in the first quarter were $9.3 billion, down 0.3 percent over first quarter 2013. Combined first quarter mainline cost per available seat mile (CASM) was 13.50 cents, down 2.7 percent on a 2.7 percent increase in mainline ASMs versus first quarter 2013. This cost improvement was largely due to a 4.8 percent decrease in year-over-year mainline fuel prices. Excluding special charges, fuel and profit sharing, mainline CASM was up 4.0 percent compared to the first quarter 2013, at 8.96 cents. Regional CASM excluding special charges and fuel was 16.62 cents, up 5.0 percent on a 3.2 percent decrease in regional ASMs versus first quarter 2013.

Liquidity

As of March 31, 2014, American had approximately $10.6 billion in total cash and short-term investments, of which $947 million was restricted. The company also has an undrawn revolving credit facility of $1.0 billion. Approximately $750 million of the company’s unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable exchange rate of 6.32 bolivars to the dollar. This includes approximately $94 million valued at 4.3 bolivars, approximately $611 million valued at 6.3 bolivars and approximately $45 million valued at 10.7 bolivars, with the rate depending on the date the company submitted its repatriation request to the Venezuelan government.

In the first quarter of 2014, the Venezuelan government announced that a newly-implemented system (SICAD I) will determine the exchange rate (which fluctuates as determined by weekly auctions and at March 31, 2014 was 10.7 bolivars to the dollar) for repatriation of cash proceeds from ticket sales after January 1, 2014, and introduced new procedures for approval of repatriation of local currency. The company is continuing 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.

Since the merger, the company paid $542 million in tax withholdings for employees in lieu of issuing shares of common stock as compensation as permitted under the Plan of Reorganization, thereby reducing the number of shares expected to be issued under the Plan by approximately 20 million. Additionally, the company has elected to utilize the cash settlement feature for the remaining $22 million principal amount of US Airways Group 7.25% convertible notes due May 15, 2014, which will further reduce diluted shares by approximately 4 million shares.

Special Items

In the first quarter, the company recognized a combined total of $78 million in net special credits, including:

$137 million in net special credits consisting primarily of the gain on the sale of slots at Reagan National Airport offset in part by integration and merger-related expenses

$47 million in non-operating special charges due primarily to non-cash interest accretion on bankruptcy settlement obligations

$8 million in non-cash deferred income tax provision related to certain indefinite-lived intangible assets

$4 million in regional non-operating charges

Additional Integration Related Developments

Distributed $11 million to employees for baggage handling and on-time performance in the month of January; this distribution of $100 per employee is part of the company’s Triple Play program which measures on-time arrivals and baggage performance as reported in the DOT’s Air Travel Consumer Report (ATCR)

Conducted first joint Captain Leadership Training with newly promoted captains from both airlines

On April 9, Piedmont flight attendants ratified a new five-year Collective Bargaining Agreement
Opened a new Admirals Club lounge at the company’s Philadelphia (PHL) hub

Fleet/Network Developments

As part of its plan to modernize its fleet by replacing older aircraft with newer, more fuel-efficient aircraft, the company inducted 12 new Airbus A321 aircraft into service between New York’s John F. Kennedy International Airport (JFK) and Los Angeles International Airport (LAX), and JFK and San Francisco International Airport (SFO). American is now the only U.S. carrier to offer three classes of service between these key markets.

The company also took delivery of one Airbus A330-200 aircraft, five Boeing 737-800 aircraft and one Boeing 777-300 aircraft during the first quarter.

Revealed new Boeing 767-300 and 777-200ER cabin retrofits, which feature lie-flat seats with direct aisle access in Business Class

In April 2014, the company exercised its option to purchase (and thus terminated its existing lease financing arrangements) for 62 Airbus A320 family aircraft scheduled to be delivered between first quarter 2015 and third quarter 2017. In connection with this decision, the company also exercised its right to convert firm orders for 30 Airbus A320 family NEO aircraft (scheduled to be delivered in 2021 and 2022) to options to acquire such aircraft.

Top Copyright Photo: Rolf Wallner/AirlinersGallery.com. American Airlines’ Boeing 767-323 ER N346AN (msn 33085) taxies at Zurich.

American Airlines: AG Slide Show

US Airways: AG Slide Show

Bottom Copyright Photo: Jay Selman/AirlinersGallery.com. US Airways is now planning to operate the last Boeing 737 revenue flight on August 18 at the Charlotte hub. Boeing 737-4B7 N450UW (msn 24933) arrives back at CLT.

 

AMR Corporation and the US Airways Group come together as the American Airlines Group

AMR Corporation (Dallas/Fort Worth) and US Airways Group, Inc. (Phoenix) today announced the completion of their merger to officially form American Airlines Group Inc. (NASDAQ: AAL) and begin building the new American Airlines (Dallas/Fort Worth).

According to the new airline group, “The new American has a robust global network with nearly 6,700 daily flights to more than 330 destinations in more than 50 countries and more than 100,000 employees worldwide.  The combined airline has the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace. Customers will soon enjoy access to more benefits and increased service across the combined company’s larger worldwide network and through an enhanced oneworld® Alliance. US Airways will exit Star Alliance on March 30, 2014 and will immediately enteroneworld on March 31, 2014. With an expanded global network and a strong financial foundation, American will deliver significant benefits to consumers, communities, employees and stakeholders.”

Although American and US Airways have come together as one company, the process to achieve a Single Operating Certificate is expected to take approximately 18 to 24 months. In the meantime, customers should continue to do business with the airline from which travel was purchased just as they did before the merger.  In short, it is “business as usual.”  The airlines’ separate websites, aa.com and usairways.com, as well as the two airlines’ reservations systems and loyalty programs, will continue to operate separately until further in the integration process.

Customer benefits of the transaction to be rolled out over time include:

  • A codeshare agreement between American and US Airways, creating more convenient access to the combined company’s global network
  • More choices and connectivity, with nine hub airports across the U.S.
  • Global access to a stronger oneworld alliance – including joint businesses with British Airways, Iberia and Finnair across the Atlantic and with Japan Airlines and Qantas across the Pacific – creating more options for travel and benefits both domestically and internationally
  • Reciprocal American Admirals Club and US Airways Club benefits and reciprocal elite recognition
  • Upgrade reciprocity
  • Consolidation of loyalty programs and expanded opportunities to earn and redeem miles across the combined network
  • Full integration of policies, websites, kiosks and customer-facing technology to ensure a consistent worldwide travel experience
  • Co-location of ticket counters and gates in key markets
  • With firm orders for more than 600 new mainline aircraft, American will have one of the most modern and efficient fleets in the industry, and a solid foundation for continued investment in technology, products, and services

Customers will begin to see enhancements to their experience in early January, including the ability to earn and redeem miles when traveling on either American Airlines or US Airways, reciprocal American Admirals Club and US Airways Club benefits, and reciprocal elite recognition.  The combined airline expects to share more details around these key customer benefits early next year.

As the integration process is underway, American’s new Find Your Way site, aa.com/findyourway, will connect customers to key information throughout the merger integration process.  Additionally, customers should visit aa.com and usairways.com, which will continue to be regularly updated with news on any fee, policy and procedure changes.

Employees of the new American will benefit from being part of a company with a more competitive and stronger financial foundation, which will create greater career opportunities over the long term.  The completed merger also provides the path to improved compensation and benefits for employees.

Alignment of pay, benefits, work rules and other guidelines for employees of both airlines will be phased in over time so that all changes can be carefully considered.  Represented employees will continue to work under their respective Collective Bargaining Agreements, with the modifications provided under the negotiated Memoranda of Understanding for certain groups.  American’s non-represented Agents, Representatives and Planners will operate under their current terms and conditions of employment with merger-related adjustments.

The combination is expected to deliver enhanced value to American Airlines’ stakeholders and US Airways’ investors.  The transaction is expected to generate more than $1 billion in annual net synergies by 2015.

The common and preferred stock of American Airlines Group will trade on the NASDAQ Global Select Market under the symbols “AAL” and “AALCP,” respectively.

Rothschild is serving as financial advisor to American Airlines, and Weil, Gotshal & Manges LLP, Jones Day, Paul Hastings, Debevoise & Plimpton LLP and K&L Gates LLP are serving as legal counsel.  Barclays and Millstein & Co. are serving as financial advisors to US Airways, and Latham & Watkins LLP, O’Melveny & Myers LLP, Dechert LLP and Cadwalader, Wickersham & Taft LLP are serving as legal counsel to US Airways. Moelis & Company and Mesirow Financial are serving as financial advisors to the Unsecured Creditors Committee. Skadden, Arps, Slate, Meagher & Flom LLP and Togut, Segal & Segal LLP are serving as the Unsecured Creditors Committee’s legal counsel.

Copyright Photo: Brian Peters/AirlinersGallery.com. Repainted with the new tail markings, Boeing 777-223 ER N791AN (msn 30254) departs from the DFW Hub in the “new look” AA Oneworld livery. N791AN is the first American aircraft to appear in the updated Oneworld color scheme.

Video: A “Thank You” from outgoing CEO Tom Horton of the American Airlines:

American Airlines: AG Slide Show

AMR proposes to exit Chapter 11 and merge with the US Airways Group on December 9

AMR Corporation (American Airlines) (Dallas/Fort Worth) today issued this statement:

Today, the U.S. Bankruptcy Court for the Southern District of New York approved the settlement of the lawsuit reached with the U.S. Department of Justice (DOJ) and certain states relating to the merger of AMR Corporation and US Airways Group, Inc. (US Airways). The court also ruled that the merger may be consummated despite the pendency of a private antitrust lawsuit. As a result of the Court’s rulings, AMR Corporation, the parent company of American Airlines, Inc., today filed with the U.S. Bankruptcy Court for the Southern District of New York a notice that the proposed effective date of the Plan of Reorganization will be December 9, 2013.

Consummation of AMR’s Plan of Reorganization and the merger of US Airways Group, Inc. with and into a subsidiary of AMR Corporation is planned to be completed prior to the securities markets opening on December 9, 2013. Assuming this expected schedule, the last day of trading of all outstanding securities of AMR, including the common stock trading under the symbol “AAMRQ,” and the common stock of US Airways Group, Inc. (Phoenix) will be December 6, 2013.

Upon the anticipated closing of the merger on December 9, 2013, AMR Corporation will be renamed American Airlines Group Inc., with its common stock to be listed and traded on the NASDAQ Global Select Market under the symbol “AAL” and its preferred stock to be listed and traded on the NASDAQ Global Select Market under the symbol “AALCP.”

At the time the Plan of Reorganization becomes effective and the merger closes, each outstanding share of US Airways Group, Inc. common stock will be converted into one share of American Airlines Group Inc. common stock and substantially all pre-Chapter 11 unsecured claims against and outstanding equity securities of AMR Corporation will be satisfied by  American Airlines Group Inc. common stock or preferred stock in accordance with the Plan of Reorganization.

This merger will create the world’s largest airline. It will be the end of US Airways as a stand alone company (operating initially under the American Airlines Group until the merger is finally implemented). The top management of US Airways will essentially take over the new American Airlines.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. American’s Boeing 737-823 N922NN (msn 29523) soars away from Los Angeles International Airport.

American Airlines: AG Slide Show

US Airways: AG Slide Show

AMR asks the bankruptcy court to approve the DOJ agreement leading to a merger with US Airways Group

AMR Corporation (American Airlines) (Dallas/Fort Worth) has asked the bankruptcy court to approve the settlement agreement with the Department of Justice (DOJ) permitting it to merge with the US Airways Group (US Airways) (Phoenix) according to this report by Reuters. One group of consumers opposed the merger, otherwise no one is objecting to DOJ settlement according to the AMR lawyers.

Bankruptcy Court Judge Sean Lane said he would offer a ruling in 24 to 36 hours.

If approved, the new merged group would become the American Airlines Group.

Read the full report: CLICK HERE

Copyright Photo: Michael B. Ing/AirlinersGallery.com. The rapid repainting of the American fleet in the new 2013 look has likely hit the “tipping point” that incoming CEO Parker is now unlikely to change due to the delay in getting the merger approval. This livery will probably remain as the color scheme of the “new American” once the merger is completed. The new American is really America West Airlines (due to the ongoing management) doing business soon as American Airlines (formerly US Airways). Boeing 777-223 ER N770AN (msn 29578) climbs away from Los Angeles.

American Airlines: AG Slide Show

US Airways: AG Slide Show

The “new American” to operate under the umbrella of the American Airlines Group Inc.

AMR Corporation (Dallas/Fort Worth), whose principal operating subsidiary is American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (Phoenix) today announced that they have applied to list the common stock of the combined company on the NASDAQ Global Select Market. Upon closing of the merger and AMR’s emergence from Chapter 11, the combined company will be renamed American Airlines Group Inc. and will use the ticker symbol “AAL.” Additionally, the common stock of both US Airways Group, Inc. and AMR Corporation will be cancelled and shareholders will receive equity interests in American Airlines Group Inc. per the terms of the Merger Agreement and Plan of Reorganization.

Copyright Photo: Ken Petersen/AirlinersGallery.com. American Airlines’ Boeing 777-323 ER N721AN (msn 31546) prepares to touch down in New York (JFK).

American Airlines: AG Slide Show

AMR reports a third quarter net profit of $420 million, excluding reorganization and special items

AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., (Dallas/Fort Worth) reported results for the third quarter ended September 30, 2013. Key highlights include:

  • Net profit of $530 million, excluding reorganization and special items, a $420 million improvement year-over-year; on that basis, it is the most profitable quarter in company history
  • Revenue of $6.8 billion, up 6.2 percent year-over-year; the highest quarterly revenue total in company history
  • Consolidated unit costs, excluding fuel and special items, improved 5.0 percent year-over-year, marking the fourth consecutive quarter of unit cost reduction
  • AMR ended the third quarter with approximately $7.7 billion in cash and short-term investments, including restricted cash, compared to a balance of approximately $5.1 billion at the end of the third quarter of 2012
  • American continued its fleet renewal, taking delivery of ten fuel-efficient Airbus A319s, eight Boeing 737-800s, and one Boeing 777-300 ER in the quarter, while also placing into service four Embraer ERJ 175s operated by one of its affiliated regional carriers
  • American and US Airways Group are vigorously defending the lawsuit filed by the Department of Justice seeking to enjoin their planned merger and continue to move forward with developing a merger integration plan
  • American accrued $59 million in employee profit sharing in the quarter, and has accrued a total of $65 million for employee profit sharing this year. The anticipated distribution would be the first profit sharing payout in thirteen years

“We are pleased to report our highest quarterly net profit in American’s history, excluding reorganization and special items, thanks to the hard work of the entire American team,” said Tom Horton, AMR’s chairman, president and CEO. “Continued execution on our product, network and alliance strategy, combined with cost efficiencies from restructuring and fleet renewal, creates strong momentum towards our planned merger with US Airways. And we are especially pleased to set aside $59 million this quarter in expectation of making our first profit-sharing payout since 2001 to our people who have done so much to put American back on top.”

In the third quarter of 2013, GAAP net profit was $289 million, a $527 million improvement compared to the prior-year period. Excluding reorganization and special items, the third quarter 2013 net profit was $530 million. This is a $420 million improvement compared to the prior-year period. In the quarter, AMR had $241 million of reorganization and special items, which are detailed below.

Financial Progress

AMR continued to drive profitability and significant margin expansion in the third quarter, achieving a pre-tax margin of 7.8 percent, excluding reorganization and special items, an improvement of 6.1 points over the prior-year period, and a GAAP pre-tax margin of 4.2 percent, an improvement of 7.9 points compared to the third quarter of 2012.

On a trailing twelve month basis, the third quarter marked AMR’s seventh consecutive quarter of improved pre-tax margins.  This margin expansion is driven by the realization of restructuring efforts to improve the operational and financial performance of the company, and AMR expects to realize additional improvements as the company continues to implement new terms reached with certain vendors and suppliers. AMR also expects results going forward to be bolstered as it competes more effectively by better matching aircraft size with demand through the continued deployment of the new Airbus A319 narrowbodies and the new two-class large regional jets, both of which started entering into service in the third quarter.

“As we continue to deliver substantial margin expansion and record results, we are positioning the company for long-term success,” said Bella Goren, AMR’s chief financial officer. “In addition, our financing activities have significantly enhanced our liquidity, and are enabling us to pay down high-interest debt and efficiently fund our impending emergence from the restructuring process.”

In the third quarter of 2013, AMR strengthened its liquidity and reduced its effective interest rates through several key transactions. AMR completed a private offering of $1.4 billion of enhanced equipment trust certificates with a coupon of 4.95 percent. The proceeds from this offering were used to pay off in full three prior aircraft financings with coupons of 8.625 percent, 10.375 percent, and 13 percent. The third quarter also marked the closing of an $850 million term loan, secured by American’s South American slots, gates, and routes, incremental to the $1.05 billion term loan secured by the same collateral that closed in the second quarter.

Revenue Performance

For the third quarter of 2013, AMR reported record consolidated revenue of approximately $6.8 billion, up 6.2 percent versus the same period last year. Consolidated passenger revenue was approximately $6.0 billion, an increase of 6.4 percent – and the highest quarterly passenger revenue in company history. Mainline and regional passenger revenue and cargo revenue each increased year-over-year as total operating revenue in the third quarter of 2013 was approximately $399 million higher than the third quarter of 2012.

“American’s solid revenue momentum continued in the third quarter, with especially strong performance at our domestic hubs, and in the Atlantic and Caribbean regions,” said Virasb Vahidi, American’s chief commercial officer. “We’re particularly pleased with our strength across the Atlantic, reflecting the success of our joint business with British Airways, Iberia and Finnair.

Through this partnership, we offer our customers more New York-London travel options than any other alliance, with 17 daily nonstop flights from New York area airports. This is yet another example of putting the customer at the center of everything we do.”

Consolidated passenger revenue per available seat mile (unit revenue) increased 3.4 percent versus the same quarter last year, to an all-time record for any quarter of 13.79 cents per available seat mile (ASM). Mainline unit revenue at American increased 4.0 percent versus the prior-year period, reaching an all-time record for any quarter of 13.11 cents per ASM.

The company’s unit revenue performance was driven by record passenger yield, or revenue per passenger mile, of 16.36 cents per mile, a 4.0 percent year-over-year improvement, and strong mainline and consolidated load factors, or percentage of seats filled, of 85.0 percent and 84.3 percent, respectively.

Operating Expense

For the third quarter, AMR’s consolidated operating expenses decreased $248 million, or 3.9 percent, versus the same period in 2012. Mainline and consolidated cost per available seat mile (unit cost) in the third quarter decreased 7.4 percent and 6.6 percent, respectively.

Excluding special items, AMR’s consolidated operating expenses decreased $52 million, or 0.8 percent, year-over-year.

Fuel expense in the third quarter increased $40 million year-over-year on a 2.9 percent increase in ASMs. Taking into account the impact of fuel hedging, AMR paid $3.04 per gallon for jet fuel in the third quarter of 2013 versus $3.12 per gallon in the third quarter of 2012, a 2.6 percent decrease.

Excluding fuel and special items, mainline and consolidated unit costs in the third quarter of 2013 decreased 5.4 percent and 5.0 percent year-over-year, respectively, primarily driven by the company’s restructuring efforts. This was the fourth consecutive quarter of non-fuel unit cost reduction.

In addition, AMR achieved an operating profit of $713 million and an operating margin of approximately 10.4 percent, an improvement of approximately $451 million and 6.3 points, respectively, over the prior-year period, excluding special items in both periods. On a GAAP basis, AMR realized an operating profit of $698 million and an operating margin of approximately 10.2 percent, an improvement of approximately $647 million and 9.4 points, respectively, over the prior-year period.

An unaudited summary of third 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 third quarter with approximately $7.7 billion in cash and short-term investments, including a restricted cash balance of $935 million, compared to a balance of approximately $5.1 billion in cash and short-term investments, including a restricted cash balance of approximately $847 million, at the end of the third quarter of 2012. The increase was generated by operating activities and by financing initiatives in 2013.

Fleet Renewal and Transformation

In the third quarter, American made significant progress on its fleet renewal program, adding new, efficient and more comfortable aircraft.

  • The newest member of America’s fleet – the Airbus 319 – went into service in September, flying from Dallas/Fort Worth to Charlotte, Cleveland, Memphis and Wichita. These modern and fuel-efficient aircraft represent an important milestone in the company’s journey to transform the travel experience for its customers. American took delivery of ten A319s in the third quarter.
  • The company launched its first service with the 76-seat Embraer ERJ 175 operated by one of its affiliated regional carriers. This large regional aircraft in a two-class cabin configuration allows the company to better match supply and demand with the right amount of schedule frequency.
  • American also took delivery of eight Boeing 737-800s and one Boeing 777-300ER.

In the fourth quarter, American expects to take delivery of its first five Airbus A321 trans-con aircraft – specially configured with fully lie-flat First and Business Class seats. These aircraft are anticipated to enter service in January 2014.

Through the third quarter, American has taken delivery of 43 out of the 59 new mainline aircraft slated for delivery in 2013, including seven Boeing 777-300 ERs.

Pending Merger with US Airways Group

  • In the third quarter, American and US Airways Group continued preparing for their planned merger announced on Feb. 14, 2013.
  • On Aug. 13, the Antitrust Division of the Department of Justice (DOJ) and certain states filed a lawsuit to enjoin the merger.
  • American and US Airways Group are vigorously defending the lawsuit. The trial is scheduled to begin Nov. 25. The company is confident that the merger would provide significant customer benefits and enhance competition in the airline industry.
  • On Oct. 1, American and US Airways Group announced they reached an agreement with the Texas Attorney General to support the proposed merger of American and US Airways Group.
  • American and US Airways Group continue to move forward with developing a merger integration plan designed to ensure a positive outcome for their customers, employees and stakeholders.

The merger is conditioned on the satisfactory resolution of the pending antitrust litigation with the DOJ and other customary closing conditions.

Operational Performance

American ran a solid operation during the busy summer travel season, achieving an on-time arrival rate of 79.5 percent, its best third quarter performance since 2010. American’s improved operational results for the quarter also include a completion factor of 99.0 percent, its best since 2010.

Recent Business Highlights

American has a strong commitment to its customers, its people, and the communities it serves. Recent American highlights include:

  • Launching new codeshare agreements with Bogota-based LAN Colombia and Sao Paulo-based TAM Airlines, which will add new service to key destinations and increase American’s network connectivity in the Latin American region, further strengthening American’s relationship with LATAM Airlines Group
  • Strengthening its global presence to best meet customer demand by announcing that American will launch its first-ever nonstop service from Dallas/Fort Worth International Airport (DFW) to Hong Kong International Airport (HKG) and Shanghai Pudong International Airport (PVG) next year
  • Opening its Flagship Check-In for premium customers at Chicago’s O’Hare airport, making it American’s fourth airport to offer this enhanced customer experience
  • Announcing plans to hire 1,500 new pilots over the next five years. The company has offered to recall all of its furloughed pilots and will begin the new recruiting later this fall.  This is in addition to the hiring and training underway for 1,500 new flight attendants and the more than 1,200 Premium Services Representatives, Airport Agents and Reservations Agents who have joined the American team this year

Restructuring Progress

On Sept.12, the U.S. Bankruptcy Court for the Southern District of New York stated that it would enter an order confirming American’s Plan of Reorganization (the Plan). The next steps the company seeks to take are to achieve antitrust clearance and consummate the Plan and the company’s pending merger with US Airways Group.

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 Group.

Reorganization and Special Items

AMR’s third quarter 2013 results include the impact of $241 million in reorganization and special items.

  • Of that amount, AMR recognized a $151 million loss in reorganization items resulting from the filing of voluntary petitions for reorganization under Chapter 11 by certain of its direct and indirect U.S. subsidiaries on Nov. 29, 2011. These items primarily consist of professional fees, as well as allowed and estimated allowed claim amounts.
  • In conjunction with the repayment of the existing financings, the company incurred cash charges of $19 million, included in interest expense, and a charge of $54 million, included in Miscellaneous, net, related to the premium on tender for the existing financings and to the write-off of unamortized issuance costs.
  • The company’s results for the third quarter also include special charges and merger-related expenses of $15 million.

Capacity Guidance

AMR estimates consolidated capacity in the fourth quarter of 2013 to be up approximately 3.5 percent versus the fourth quarter of 2012, primarily driven by the combination of an estimated 1.5 percent year-over-year increase in the average stage length per operation flown, and by new or increased capacity into South Korea, Mexico and Central and South America.

For the full year 2013, consolidated capacity is estimated to increase approximately 1.5 percent versus the prior year.

Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 777-223 ER N778AN (msn 29587) arrives at London (Heathrow).

American Airlines: AG Slide Show

Planely Speaking: All Slotted Up: The new American Airlines and DCA

Planely Speaking

Guest Editor Aaron Newman
Aaron Newman (small)

All Slotted Up: The new American Airlines and DCA

By Aaron Newman

By now we’ve all heard of the Justice Departments lawsuit filed on Aug. 13 to stop the $11 billion deal between US Airways Group (US Airways) and AMR Corporation (American Airlines). The DOJ argues the merger would violate antitrust laws because it will lead to higher airfares, less competition on high profile routes and therefore higher costs to the traveling public. In November, a judge will hear the case without a jury and decide whether the merger should go forward. With just under two months before the November 25th antitrust case involving American Airlines and U.S. Airways, I will be spending the next 2-3 months dissecting three topics in depth likely to be crucial topics in the courtroom.

A hot topic in talks between the Justice Department and the corporations is whether the airlines will agree to sell slots; takeoff and landing rights, to reduce their dominance at Reagan National Airport outside Washington, D.C. Airlines must possess slots which give them rights to one takeoff or landing per day.  Three miles south of downtown Washington D.C., DCA is the preferred airport in the D.C. beltway. The airport provides easy transit points for politicians and professionals looking to be downtown within minutes. The only problem…the airport is slot restricted in an effort to direct passengers to the suburban and more distant Dulles International Airport (IAD).

DCA-IAD Regional Map

Source: Nationalrealitybiz.com

DCA is one of a few airports in the nation where regulations limit the number of flights. Slots at DCA are particularly valuable for airlines, since many people will pay a premium to fly from convenient DCA instead of more distant Dulles or BWI.  For example, JetBlue recently leased 8 daily round trips from US Airways at a cost of $40 million, used for increased frequencies to Boston. U.S. Airways currently claims DCA as its fourth largest hub and provides nonstop service to 71 airports from Reagan National, and faces no nonstop competitors on 55 of those routes (as of July 2013). Doug Parker, CEO of U.S. Airways and post-merger American, says DCA will remain a critical east coast hub for the new airline. Post-merger, US Airways will lessen capacity to existing American Airlines destinations. This will allow US Airways to expand its hub operations at Reagan, adding new small city destinations in the eastern half of the United States, a strong argument in the airlines attempt to retain all 68% of its slots.

Source: U.S. Department of Transportation

With U.S. Airways already claiming 56% of slots at DCA, the new airline will claim 68% post-merger, it’s anticipated by industry insiders that the new American will be forced to concede slots in order to satisfy the courts and complete a merger. United and Continental had to lease slots at Newark Liberty to Southwest in order to complete their 2010 merger, according to this report by Business Travel News. One argument against divesting slots at DCA is that many are used for small regional cities throughout the East Coast. US Airways surprisingly only carries 35% of all passengers at DCA despite holding 56% slots. This is due to the fact that many of the flights are used for smaller cities on turboprops and regional jets. CEO of U.S. Airways, Doug Parker has been arguing that if his airline has to divest slots, other airlines will simply use them to fly to large hub cities. Some members of Congress have even sent a letter asking for US Airways/American to keep its slots so their own constituencies can keep their flights.

DCA Route Map

In this report by Reuters, it gives detail of a recent attempt by JetBlue management and CEO, David Berger to persuade lawmakers to take away a portion of DCA slots in the name of anti-competitiveness. Berger suggests that the new American should not exceed the current 55% threshold at DCA. “JetBlue believes that the merger, absent meaningful action by the Department of Justice, will make an unbalanced competitive situation at Ronald Reagan Washington National Airport (DCA) even worse,” Robert Land, JetBlue’s senior vice president stated in a recent letter to Senator Charles Schumer (D-New York).

My Take

It’s unlikely that the new American will escape the trial without conceding slots at DCA. I suspect the new American will retain between 55 and 59 percent of slots at DCA. This will result in some regional cities losing service, cities like Huntsville AL, Bangor ME, and White Plains, NY. It’s probably important to note that the combined American will hold roughly a 49% market share at Reagan National, US Airways today only holds a 35%   market share despite holding 56% of the slots. Regional flights are made possible because US Airways has such a large slot allotment at Reagan. The US Airways operation at DCA is a secondary connecting airport because of the frequency enabled by the slot holdings. If the new airline were forced to divest a larger percentage of slots the hub operation would begin to look different than it does today – the economics of regional flights make it unworkable.

The bigger question is how the remaining 8-12 percent of slots be divided among other airlines? This will be an interesting development going forward.  I agree with Parker that large hub cities will be the winners in this case. Cities like Newark NJ, Atlanta GA, Chicago IL Midway, etc. In conclusion, there are currently four major slot restricted airports in the U.S.; New York JFK, La Guardia (LGA), Newark (EWR), and Washington Reagan (DCA). Two different airlines have a market share that is greater than the important 49% number; Delta at La Guardia and United at Newark. Both of those market conditions were granted approval by the DOJ without going to trial. So, why is this merger and DCA suddenly being treated differently?

Top Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com.

American Airlines: AG Slide Show

US Airways: AG Slide Show

Bottom Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com.

The State of Texas now supports the American-US Airways merger

American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) received good news in its efforts to merge. The State of Texas has dropped out of the group opposing the merger along with the U.S. Department of Justice (DOJ). Texas now supports the merger and issued this statement:

Texas Attorney General Greg Abbott, AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., and US Airways Group, Inc. (Phoenix) have announced they have reached an agreement for the Texas Attorney General to support the proposed merger of American and US Airways.

Under the terms of the agreement, the new American Airlines will maintain scheduled daily service to more than twenty airports in Texas. In addition, the agreement provides that Dallas/Fort Worth International Airport be maintained as a large hub airport for the combined airline and that the new American will maintain its headquarters in the Dallas/Fort Worth area.

The State of Texas had previously joined the U.S. Department of Justice (“DOJ”) as co-plaintiff in its pending suit to block the merger of American Airlines and US Airways. With today’s agreement, the Texas Attorney General has agreed to withdraw his participation in the DOJ’s lawsuit.

“I’m pleased we were able to find common ground and gain the carefully considered support of the Attorney General in our home state,” said Tom Horton, chairman, president and CEO of AMR. “This is an important step forward for American Airlines, for Texas, and for our customers and people of both American and US Airways. Texas has long played a lead role in our company’s history, and this agreement is assurance of our commitment to maintain and enhance the outstanding levels of service and connectivity that the new American will provide to the citizens of Texas. This merger will enhance job security and career opportunities for our combined Texas based employee base of nearly 25,000. The combined airline will fly more people and more goods to more places while providing more competition to benefit customers in the U.S. and abroad. We thank Attorney General Abbott for his partnership in finding a solution and also thank the people of American and US Airways for their continued support of the merger.”

Doug Parker, chairman and CEO of US Airways, said the following: “We are grateful to have the support of Attorney General Abbott. In addition, the support for the merger from the employees of American Airlines and US Airways has been overwhelming. This combination makes sense for our customers, employees and the communities we serve. We are dedicated to completing this merger on behalf of all of them.”

Texas airports included in the agreement include:

  • Abilene Regional Airport
  • Austin-Bergstrom International Airport
  • Brownsville/South Padre Island International Airport
  • Corpus Christi International Airport
  • Dallas/Fort Worth International Airport
  • East Texas Regional Airport
  • Easterwood Airport
  • El Paso International Airport
  • Houston William P. Hobby Airport
  • Houston George Bush Intercontinental Airport
  • Jack Brooks Regional Airport
  • Killeen-Fort Hood Regional Airport
  • Laredo International Airport
  • Lubbock Preston Smith International Airport
  • McAllen-Miller International Airport
  • Midland International Airport
  • Rick Husband Amarillo International Airport
  • San Angelo Regional Airport
  • San Antonio International Airport
  • Tyler Pounds Regional Airport
  • Waco Regional Airport
  • Wichita Falls Regional Airport

In other news, the DOJ lost its bid to delay the trial in its lawsuit to stop the merger. Many of the DOJ’s attorneys and staff were put on furlough due the government shutdown.

The “airline trial of the century” will proceed as scheduled in late November.

Copyright Photo: Eddie Maloney/AirlinersGallery.com. American’s Boeing 737-823 WL N938NN (msn 33490) lands in Las Vegas.

American Airlines: AG Slide Show

US Airways: AG Slide Show

The DOJ objects to handing over its merger analysis documents to American Airlines-US Airways

The U.S. Department of Justice (DOJ) (Washington) has asked the special master handling discovery disputes to limit the number of documents it must turn over to American Airlines (Dallas/Fort Worth) and US Airways (Phoenix). The DOJ is suing both carriers to block their effort to merge. All parties are currently in the discovery phase. According to this report by Reuters, the DOJ objects to the airlines’ request to turn over all confidential internal documents relating to all previous airline merger requests in the past 10 years.

Read the full report: CLICK HERE

Copyright Photo: Marcelo F. De Biasi/Airlinersgallery.com. Boeing 737-823 N804NN (msn 29567) lands at Washington’s Reagan National Airport, across the Potomac River from the contentious and gridlocked District of Columbia.

American Airlines: AG Slide Show

US Airways: AG Slide Show

AMR and US Airways Group extend their merger agreement

AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., (Dallas/Fort Worth) and US Airways Group, Inc. (Phoenix), the parent of US Airways (Phoenix), have each agreed to extend the outside date at which either party may terminate the previously announced Agreement and Plan of Merger (the Merger Agreement), in light of the trial schedule surrounding litigation with U.S. Department of Justice (DOJ).

In a joint statement, Tom Horton, chairman, president and CEO of AMR, and Doug Parker, chairman and CEO of US Airways, said, “The Boards and management teams of AMR and US Airways remain committed to completing this combination to create the new American, and the extension of this outside date is a reflection of this commitment. Our focus is on mounting a vigorous defense and winning our court case so the new American can enhance competition, provide better service to our customers and create more opportunities for our employees.”

The amended Merger Agreement extends the date on which either AMR or US Airways may terminate the Merger Agreement from December 17, 2013 to the later of January 18, 2014, or, if the Court enters an order on or before January 17, 2014 in favor of American and US Airways, on the 15th day following the entry of such order.  In the event of an unfavorable ruling by the Court, AMR or US Airways may terminate the merger agreement five days after the Court enters a final, but appealable, order permanently enjoining the merger.

Top Copyright Photo: Brian McDonough/AirlinersGallery.com. American’s Boeing 737-823 N925NN (msn 31169) prepares to touch down at Washington’s Reagan National Airport.

American Airlines: AG Slide Show

US Airways: AG Slide Show

Bottom Copyright Photo: Jay Selman/AirlinersGallery.com. US Airways’ Embraer ERJ 190-100 IGW N961UW (msn 19000183) taxies to the runway at the Charlotte hub.