
American Airlines Group Inc. (American Airlines and US Airways) (Dallas/Fort Worth) today reported fourth quarter and full year 2013 results.
- As the result of the merger which closed onย Dec. 9, 2013, US Airways Group became a subsidiary of AMR Corporation which changed its name to American Airlines Group Inc. (AAG)
- Fourth quarter 2013 combined net profit wasย $436 millionย on a non-GAAP basis excluding net special charges. This represents aย $478 millionย improvement versus the company’s combined fourth quarter 2012 non-GAAP net loss ofย $42 millionย excluding net special credits
- 2013 combined net profit wasย $1.9 billionย on a non-GAAP basis excluding net special charges, aย $1.5 billionย improvement versus the company’s combined 2012 non-GAAP net profit ofย $407 millionย excluding net special charges
- The company ended the year withย $10.3 billionย in total cash and investments. Since the merger, the company has used more thanย $300 millionย of cash to reduce its diluted shares outstanding by approximately 14 million
For the fourth quarter 2013, AAG reported a GAAP net loss ofย $2.0 billion, which includesย $2.4 billionย of net special charges. This compares to a net profit ofย $262 million, which includesย $350 millionย of net special credits in the fourth quarter 2012. AAG’s GAAP financial results include the results for US Airways only for the period from the completion of the merger onย Dec. 9, 2013ย throughย Dec. 31, 2013.
For full year 2013, GAAP net loss wasย $1.8 billion, which includesย $3.1 billionย of net special charges. This compares to a full year 2012 net loss ofย $1.9 billion, which includesย $1.7 billionย of net special charges.
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 (not just the period since the merger closed). 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.
Fourth quarter 2013 combined net profit wasย $436 millionย on a non-GAAP basis excluding net special charges. This compares to a combined non-GAAP net loss ofย $42 millionย excluding net special credits for the same period in 2012. Based on a diluted share count of 742 million, fourth quarter 2013 diluted earnings per share wasย $0.59ย on a non-GAAP basis.
For 2013, the company’s combined net profit wasย $1.9 billionย on a non-GAAP basis excluding net special charges. This represents aย $1.5 billionย improvement over the company’s combined 2012 non-GAAP net profit ofย $407 millionย excluding net special charges.
“The early returns on our merger are very positive,” saidย Doug Parker, CEO of American Airlines Group Inc. “Our teams are working well together and our customers are already beginning to see the benefits of our combined network. We have much work ahead, but believe we are on our way to restoring American as the greatest airline in the world. These financial results are evidence of the strong foundation we have in place and we anticipate improving upon these results as we further integrate our operations in 2014.”
Merger Integrationย
Since closing the merger onย December 9, 2013, the company has made significant progress in integrating American Airlines and US Airways. Key accomplishments include:
- Launched the first phase of codesharing which offers customers improved access to the company’s global network by allowing them to book select flights on both airlines’ networks
- Provided reciprocal benefits for Club members and Elite members, including priority check-in, waiver of fees for checked bags, complimentary access to preferred seats, priority security, early boarding and priority baggage delivery
- Allowed AAdvantageยฎย and Dividend Miles members to earn and redeem miles when traveling across either airline’s network
- Trained more than 85,000 customer-facing employees
Revenue and Cost Comparisons
On a combined basis, total revenues in the fourth quarter wereย $10.0 billion, up 8.7 percent versus the fourth quarter 2012 on a 3.4 percent increase in total available seat miles (ASMs). Fourth quarter combined consolidated passenger revenue per ASM (PRASM) wasย 13.64 cents, up 5.0 percent versus the fourth quarter 2012, driven by a 5.3 percent increase in yield.
Strong demand and high load factors led to 2013 total combined revenues ofย $40.4 billion, which were up 4.7 percent versus 2012. Full year combined consolidated PRASM wasย 13.67 cents, up 2.6 percent versus 2012.
Total combined operating expenses in the fourth quarter wereย $9.7 billion, up 7.0 percent over fourth quarter 2012. Combined fourth quarter mainline cost per available seat mile (CASM) wasย 14.17 cents, up 4.2 percent on a 3.6 percent increase in mainline ASMs versus fourth quarter 2012. Excluding special charges, fuel and profit sharing, mainline CASM wasย flat compared to the fourth quarter 2012, at8.49 cents. Regional CASM excluding special charges and fuel wasย 15.73 cents, up 1.8 percent on a 1.6 percent increase in regional ASMs versus fourth quarter 2012.
For the full year 2013, total combined operating expenses wereย $37.8 billion, up 0.6 percent versus 2012. Excluding special charges, fuel and profit sharing, combined mainline CASM decreased 3.1 percent toย 8.37 cents versus 2012. Regional CASM excluding special credits and fuel increased 1.1 percent toย 15.38 cents versus 2012.
Liquidity and Financing Transactions
As ofย December 31, 2013, American hadย $10.3 billionย in total cash and investments, of whichย $1.0 billion was restricted. The company also has an undrawn revolving credit facility ofย $1.0 billion.ย Approximatelyย $710 millionย of this unrestricted cash balance was held as Venezuelan bolivars, valued at the weighted average applicable exchange rate ofย 6.04 bolivarsย to the dollar. The period of time to exchange those funds into dollars and repatriate them has been increasing and is presently more than a year. Onย January 24, 2014, the Venezuelan government announced that a newly-implemented system will determine the exchange rate (currently 11.36 to the dollar) for repatriation of income from future ticket sales, and introduced new procedures for approval of repatriation of local currency.ย American is working with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency.
During the fourth quarter, the company elected to pay approximatelyย $300 millionย in tax withholdings for employees under the Plan of Reorganization in lieu of issuing shares of common stock, thereby reducing the number of shares issued under the Plan by approximately 13 million. Onย January 9, 2014, the first distribution date, the company paid approximatelyย $23 millionย in additional employee tax withholdings in lieu of issuing approximately 1 million shares of common stock.ย The company may make a similar election on future distribution dates as both a service to our team members and an indication of our confidence in the value of our common stock.
Additional balance sheet and liquidity detail will be included in the company’s Form 10-K to be filed in February.
During the fourth quarter, the company engaged in these additional financing transactions:
- Completed the American Airlines offering of the Series 2013-2B EETC in aggregate face amount ofย $512 millionย and the Series 2013-2C EETC in aggregate face amount ofย $256 million
- Amended the American Airlines term loan facility and the revolving credit facility to lower the applicable LIBOR margins to 3.0% for both offerings. As part of this amendment, the LIBOR floor with respect to the term loan facility was reduced from 1.0% to 0.75%
- Utilized the floating rate debt market to refinance eight US Airways aircraft (six A321s and two A320s) at significantly reduced rates
- Financed two US Airways spare engine deliveries with a floating rate debt facility originated in 2012 while negotiating an interest rate reduction for the entire facility
- Onย Jan. 16, 2014ย the company also amended the US Airways term loan facility, to lower the applicable LIBOR margin from 3.0% to 2.75% for Tranche B1. In addition, the LIBOR floor was reduced from 1.0% to 0.75% on both the Tranche B1 and Tranche B2 loans
Special Charges
In the fourth quarter, the company recognized a combined total ofย $2.4 billionย in net special charges, including:
- $2.2 billionย in net reorganization charges consisting primarily of a deemed claim to employees, professional fees and estimated allowed claim amounts
- $497 millionย in operating expense net special charges primarily related to the pilot memorandum of understanding that became effective upon merger close, merger related costs and professional fees and a charge related to the pilot long-term disability obligation
- $324 millionย in non-cash income tax benefits primarily related to gains recorded in Other Comprehensive Income, offset in part by a charge related to deferred tax liabilities on indefinite lived assets
- $31 millionย in operating revenue net special credits related to a change in accounting method resulting from the modification of the company’s AAdvantageยฎย miles agreement with Citibank
- $21 millionย in non-operating net special charges primarily related to interest charges to recognize post-petition interest expense on unsecured obligations
Notable Accomplishments
Additional Integration Related
- Onย December 9, 2013, US Airways Group became a subsidiary of AMR Corporation which changed its name to American Airlines Group Inc. The company’s common stock began trading on the NASDAQ Global Select Market under the ticker “AAL”. Union presidents and more than 1,000 of the company’s employees joined American’s senior management team for the televised NASDAQ opening bell ceremony
- Announced the new leadership team through the Managing Director level
- Co-located our revenue management team to ensure the company is executing pricing and revenue management strategies as one organization
- Took the unprecedented step of asking team members to vote to select the aircraft livery of the merged carrier. More than 60,000 team members participated
Fleet/Network
- Continued to modernize its fleet with new, fuel-efficient aircraft. The company inducted thirteen Airbus A320 family aircraft, two A330-200 aircraft, five Boeing 737-800 and one Boeing 777-300 aircraft into its fleet
- Signed agreements with Bombardier Inc. and Embraer S.A. to purchase 90 new 76-seat regional jets that will replace smaller, less efficient 50-seat regional aircraft scheduled for retirement
- Began nonstop service between its largest hub atย Dallas/Fort Worthย andย Bogota, Colombiaย and Roatan,ย Hondurasย and announced proposed new service betweenย Dallas/Fort Worthย andย Hong Kongย andย Shanghai
- Began nonstop service between itsย Miamiย hub and Curitiba andย Porto Alegre, Brazil
- Expanded the company’s international reach from its hub atย Charlotte, North Carolina with the announcement of new, seasonal summer service toย Barcelona, Spain;ย Brussels, Belgium;ย Lisbon, Portugalย andย Manchester, England
- Announced the company will begin service toย Edinburgh, Scotlandย from itsย Philadelphiaย hub this summer
- Held the grand opening of an expanded Terminal F in PHL, the exclusive home of US Airways Express. The airport project which was managed by the company, quadrupled the facilities central area to 37,000 square feet and added 20 new food, beverage and retail outlets for our customers
Copyright Photo: Bruce Drum/AirlinersGallery.com. American’s Boeing 767-323 ER N388AA (msn 27448) arrives at the Miami hub.
American Airlines (current):ย 
American Airlines (historic):ย 
US Airways:ย 
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