American Airlines: Record profit for 2015

January 31 23:12 2016

American Airlines Group ended 2015 with a $3.3 billion profit in the fourth quarter, capping off a record-breaking year and echoing the financial results posted by several of its peers. The company’s fourth-quarter profit counted a $3 billion special credit stemming from a change in its tax valuation allowance. For all of 2015, American posted a record profit, including special items, of $7.6 billion or $11.07 per share. It had reported a $2.9 billion profit the previous year.American Airlines Parent AMR Corp. Files For Bankruptcy

“It’s hard to imagine that just two years ago American Airlines was emerging from bankruptcy,”  Doug Parker, American’s chairman and CEO, said in an earnings call Friday with investors and news media. “We are very pleased with our outlook given the positioning we have today.” Not counting special items, the airline saw a record fourth-quarter profit of $1.3 billion. And for the full year,  it reported a $6.3 billion profit, not counting special items — another record. With fuel accounting for roughly a third of an airline’s revenue, plummeting oil prices played a key role last year in boosting profits across the airline industry, and in many instances, to the highest ever. But American, which does not engage in fuel hedging, may have benefited more than most.

In large part because of a 40.8% drop in consolidated fuel expense, American reported that its total operating expenses in the October quarter were $8.6 billion, a 7.9% decline from the same three-month period in 2014. “We have directly benefited from lower fuel prices due to our lack of fuel hedges,” Derek Kerr, American’s chief financial officer, said during the earnings call. Based on prices that they do not expect to top $1.30 a gallon in 2016, the company forecast consolidated fuel expense this year to improve by roughly $2 billion over the previous year. “We expect to see another year with significant fuel savings,” Kerr said.

One issue garnering a great deal of attention at the start of this new year is the Zika virus, which has spread rapidly in travel markets such as the Caribbean and South America, and led some cruise lines and carriers to allow some travelers to cancel or change their itinerary without paying a penalty. Scott Kirby, American’s president, said during the earnings call that the carrier has not seen any impact on bookings so far. “We haven’t seen an effect yet,” he said. “It’s important to point out, unlike some other viruses in the past that were airborne, this one is not airborne and can’t be transmitted from one passenger to another, so you wouldn’t expect to have as big an impact as something like SARS.’’

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