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EX-99.2 - EX-99.2 - American Airlines Group Inc.d252392dex992.htm
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Exhibit 99.1

 

LOGO

 

LOGO   

Corporate Communications

817-967-1577

mediarelations@aa.com

FOR RELEASE: Friday, July 28, 2017

AMERICAN AIRLINES GROUP REPORTS

SECOND-QUARTER PROFIT

FORT WORTH, Texas – American Airlines Group Inc. (NASDAQ: AAL) today reported its second-quarter 2017 results, including these highlights:

 

    Recorded a second-quarter 2017 pre-tax profit of $1.3 billion, or $1.5 billion excluding net special items,1 and net profit of $803 million, or $944 million excluding net special items

 

    Reported second-quarter earnings of $1.63 per diluted share. Diluted earnings per share excluding net special items were $1.92, up 8.5 percent versus 2016

 

    Reported a 7.2 percent increase in total revenue, to $11.1 billion, and a 5.7 percent increase in total revenue per available seat mile (TRASM)

 

    Returned $500 million to stockholders in the second quarter through the repurchase of 10.0 million shares for $450 million and dividends of $50 million

“We are making important long-term investments in our product and our team at American Airlines. Our strong revenue growth is a credit to our more than 120,000 team members and evidence that these investments are working,” said Doug Parker, Chairman and CEO. “Looking forward, we are enthusiastic about our prospects for the second half of 2017, as well as 2018 and beyond.”

Revenue and Expenses

 

     GAAP     Non-GAAP1  
     2Q17     2Q16     2Q17     2Q16  

Total operating revenues ($ mil)

   $ 11,105     $ 10,363     $ 11,105     $ 10,363  

Total operating expenses ($ mil)

     9,570       8,612       9,367       8,547  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income ($ mil)

     1,535       1,751       1,738       1,816  

Pre-tax income ($ mil)

     1,291       1,493       1,496       1,594  

Pre-tax margin

     11.6     14.4     13.5     15.4

Net income ($ mil)

     803       950       944       1,001  

Earnings per diluted share

   $ 1.63     $ 1.68     $ 1.92     $ 1.77  


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 2

 

Strong passenger demand and improving yields drove a 7.2 percent year-over-year increase in total revenue, to $11.1 billion. Notable areas of passenger yield strength were in the Domestic, Central American and South American, and Caribbean regions. Cargo revenue was up 13.1 percent to $196 million due to a 15.1 percent increase in cargo ton miles. Other revenue was up 11.1 percent to $1.3 billion primarily due to the new co-branded credit card agreements that became effective in the third quarter of 2016. Second-quarter TRASM increased by 5.7 percent, on a 1.4 percent increase in total available seat miles.

Total second-quarter operating expenses were $9.6 billion, up 11.1 percent year-over-year due primarily to a 15.4 percent increase in consolidated fuel expense and a 12.5 percent increase in salaries and benefits resulting from the company’s recent investments in its team members. Total second-quarter cost per available seat mile (CASM) was 13.34 cents, up 9.6 percent. Excluding fuel and special items, total CASM was 10.49 cents, up 6.8 percent.

Commercial Initiatives

American has now expanded Basic Economy into 78 markets, including into Canada. Early results continue to be in-line with initial expectations, with approximately half of American Airlines customers buying up to Main Cabin when given the option between that and Basic Economy. The company expects to roll out Basic Economy across the rest of its domestic network by the end of September.

With an average premium of more than $400, customer adoption of the company’s new Premium Economy product has been strong. These seats are now being installed on American’s Boeing 777-200 aircraft. The company expects to retrofit most of its other widebody aircraft with this highly-differentiated seating choice for international customers by the end of 2018.

As part of its $200 million investment in the luxury travel experience, American debuted its Flagship First Dining experience and newly-renovated Flagship Lounge at New York John F. Kennedy International Airport. In addition, access to Flagship Lounges has been expanded to include Business Class customers traveling on qualifying international and transcontinental flights. Additional Flagship Lounge renovations and Flagship First Dining locations are planned at other hubs.

American Airlines President Robert Isom said, “Our investments in our product and our team are beginning to pay real dividends as we give customers more reasons to fly on American. When combined with new revenue management tools and sales initiatives targeting high yielding corporate customers, we believe our revenue growth potential is strong.

“We expect third-quarter TRASM to increase approximately 0.5 to 2.5 percent year-over-year, which reflects continued improvement in customer demand for corporate and leisure travel. We expect third-quarter pre-tax margin excluding special items to be between 10.0 and 12.0 percent.2 We also expect our fourth-quarter TRASM growth to exceed the third quarter’s growth rate,” Isom said.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 3

 

Capital Investments, Fleet, and Shareholder Returns

American plans to invest $4.1 billion in new aircraft this year as it continues to renew its fleet. During the quarter, the company invested $1.1 billion in aircraft as it took delivery of 16 mainline aircraft and 4 regional aircraft. These new deliveries will replace aircraft that are expected to leave the fleet. In addition, the company expects to invest $1.6 billion in non-aircraft capital expenditures in 2017 focused on integrating the airline, product enhancements, and operational improvements.

Since mid-2014, the company has returned more than $10.7 billion to stockholders primarily through share repurchases and dividends, and reduced the share count by 35 percent to 487.7 million shares. As of June 30, the company had approximately $1.0 billion remaining of its $2.0 billion share repurchase authority.3

The company declared a dividend of $0.10 per share, to be paid on August 28, 2017, to stockholders of record as of August 14, 2017.

Investor Update

For additional financial forecasting detail, please refer to the company’s investor relations update, filed with the Securities and Exchange Commission on Form 8-K. This filing will be available at aa.com/investorrelations.

Conference Call / Webcast Details

The company will conduct a live audio webcast of its earnings call today at 7:30 a.m. CT, which will be available to the public on a listen-only basis at aa.com/investorrelations. An archive of the webcast will be available on the website through August 28.

Notes

 

  1. In the second quarter, the company recognized $205 million in net special items before the effect of income taxes, principally consisting of merger integration expenses, fleet restructuring expenses driven by the merger and certain one-time charges to adjust the vacation accruals as a result of the salary increases for our pilots and flight attendants. See the accompanying notes in the Financial Tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

 

  2. American is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of special items cannot be determined at this time.

 

  3. Share repurchases under the buyback program may be made through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades or accelerated share repurchase transactions. Any such repurchases will be made from time to time subject to market and economic conditions, applicable legal requirements and other relevant factors. The program does not obligate the company to repurchase any specific number of shares or continue a dividend for any fixed period, and may be suspended at any time at the company’s discretion.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 4

 

About American Airlines Group

American Airlines and American Eagle offer an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries. American has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. American is a founding member of the oneworld® alliance, whose members serve more than 1,000 destinations with about 14,250 daily flights to over 150 countries. Shares of American Airlines Group Inc. trade on Nasdaq under the ticker symbol AAL. In 2015, its stock joined the S&P 500 index. Connect with American on Twitter @AmericanAir and at Facebook.com/AmericanAirlines.

Cautionary Statement Regarding Forward-Looking Statements and Information

Certain of the statements contained in this report should be considered forward-looking statements within the meaning of the Securities Act of 1933, as amended (the Securities Act), the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about our plans, objectives, expectations, intentions, estimates and strategies for the future, and other statements that are not historical facts. These forward-looking statements are based on our current objectives, beliefs and expectations, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. These risks and uncertainties include, but are not limited to, those set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (especially in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 1A. Risk Factors), and other risks and uncertainties listed from time to time in our other filings with the Securities and Exchange Commission. There may be other factors of which we are not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ materially from those discussed. We do not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 5

 

American Airlines Group Inc.

Condensed Consolidated Statements of Operations

(In millions, except share and per share amounts)

(Unaudited)

 

    

3 Months Ended

June 30,

    Percent    

6 Months Ended

June 30,

    Percent  
     2017     2016     Change     2017     2016     Change  

Operating revenues:

            

Mainline passenger

   $ 7,747     $ 7,209       7.5     $ 14,353     $ 13,773       4.2  

Regional passenger

     1,835       1,786       2.8       3,384       3,309       2.3  

Cargo

     196       174       13.1       368       336       9.8  

Other

     1,327       1,194       11.1       2,624       2,380       10.2  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total operating revenues

     11,105       10,363       7.2       20,729       19,798       4.7  

Operating expenses:

            

Aircraft fuel and related taxes

     1,510       1,314       14.9       2,912       2,343       24.2  

Salaries, wages and benefits

     3,003       2,670       12.5       5,829       5,322       9.5  

Regional expenses:

            

Fuel

     329       279       18.0       648       498       30.0  

Other

     1,291       1,239       4.3       2,546       2,452       3.8  

Maintenance, materials and repairs

     495       453       9.4       987       871       13.3  

Other rent and landing fees

     452       458       (1.2     892       879       1.5  

Aircraft rent

     294       302       (2.8     589       609       (3.3

Selling expenses

     376       334       12.5       694       642       8.0  

Depreciation and amortization

     418       374       11.5       822       729       12.8  

Special items, net

     202       62       nm       320       161       99.4  

Other

     1,200       1,127       6.5       2,354       2,205       6.8  
  

 

 

   

 

 

     

 

 

   

 

 

   

Total operating expenses

     9,570       8,612       11.1       18,593       16,711       11.3  
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating income

     1,535       1,751       (12.3     2,136       3,087       (30.8

Nonoperating income (expense):

            

Interest income

     24       16       52.7       45       28       57.7  

Interest expense, net

     (263     (249     5.8       (520     (488     6.6  

Other, net

     (5     (25     (80.6     (5     (17     (69.2
  

 

 

   

 

 

     

 

 

   

 

 

   

Total nonoperating expense, net

     (244     (258     (5.5     (480     (477     0.8  
  

 

 

   

 

 

     

 

 

   

 

 

   

Income before income taxes

     1,291       1,493       (13.5     1,656       2,610       (36.6

Income tax provision

     488       543       (10.1     619       960       (35.6
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income

   $ 803     $ 950       (15.5   $ 1,037     $ 1,650       (37.2
  

 

 

   

 

 

     

 

 

   

 

 

   

Earnings per common share:

            

Basic

   $ 1.64     $ 1.69       $ 2.08     $ 2.82    
  

 

 

   

 

 

     

 

 

   

 

 

   

Diluted

   $ 1.63     $ 1.68       $ 2.07     $ 2.80    
  

 

 

   

 

 

     

 

 

   

 

 

   

Weighted average shares outstanding (in thousands):

            

Basic

     490,818       563,000         497,360       584,622    
  

 

 

   

 

 

     

 

 

   

 

 

   

Diluted

     492,965       566,040         500,381       588,764    
  

 

 

   

 

 

     

 

 

   

 

 

   

Note: Percent change may not recalculate due to rounding.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 6

 

American Airlines Group Inc.

Consolidated Operating Statistics

(Unaudited)

 

    

3 Months Ended

June 30,

          

6 Months Ended

June 30,

        
     2017      2016      Change     2017      2016      Change  

Mainline

                

Revenue passenger miles (millions)

     53,177        51,927        2.4     98,388        98,147        0.2

Available seat miles (ASM) (millions)

     63,520        62,670        1.4     120,083        120,234        (0.1 )% 

Passenger load factor (percent)

     83.7        82.9        0.8 pts      81.9        81.6        0.3 pts 

Yield (cents)

     14.57        13.88        4.9     14.59        14.03        4.0

Passenger revenue per ASM (cents)

     12.20        11.50        6.0     11.95        11.46        4.3

Passenger enplanements (thousands)

     37,767        37,699        0.2     71,522        72,246        (1.0 )% 

Departures (thousands)

     278        283        (1.7 )%      541        555        (2.5 )% 

Aircraft at end of period

     956        947        1.0     956        947        1.0

Block hours (thousands)

     896        901        (0.5 )%      1,715        1,746        (1.8 )% 

Average stage length (miles)

     1,254        1,241        1.0     1,228        1,223        0.4

Fuel consumption (gallons in millions)

     934        931        0.4     1,766        1,786        (1.1 )% 

Average aircraft fuel price including related taxes (dollars per gallon)

     1.62        1.41        14.5     1.65        1.31        25.7

Full-time equivalent employees at end of period

     106,100        103,100        2.9     106,100        103,100        2.9

Operating cost per ASM (cents)

     12.51        11.32        10.6     12.82        11.45        12.0

Operating cost per ASM excluding special items (cents)

     12.20        11.22        8.7     12.56        11.31        11.0

Operating cost per ASM excluding special items and fuel (cents)

     9.82        9.12        7.6     10.13        9.36        8.2

Regional (A)

                

Revenue passenger miles (millions)

     6,387        6,409        (0.3 )%      12,160        11,959        1.7

Available seat miles (millions)

     8,223        8,081        1.7     16,000        15,581        2.7

Passenger load factor (percent)

     77.7        79.3        (1.6 )pts      76.0        76.8        (0.8 )pts 

Yield (cents)

     28.74        27.87        3.1     27.83        27.67        0.6

Passenger revenue per ASM (cents)

     22.32        22.10        1.0     21.15        21.24        (0.4 )% 

Passenger enplanements (thousands)

     14,049        14,252        (1.4 )%      26,654        26,620        0.1

Aircraft at end of period

     627        600        4.5     627        600        4.5

Fuel consumption (gallons in millions)

     195        191        1.8     377        369        2.2

Average aircraft fuel price including related taxes (dollars per gallon)

     1.69        1.46        15.9     1.72        1.35        27.2

Full-time equivalent employees at end of period (B)

     22,200        20,400        8.8     22,200        20,400        8.8

Operating cost per ASM (cents)

     19.71        18.78        4.9     19.96        18.94        5.4

Operating cost per ASM excluding special items (cents)

     19.69        18.75        5.0     19.94        18.88        5.6

Operating cost per ASM excluding special items and fuel (cents)

     15.69        15.29        2.6     15.89        15.68        1.3

Total Mainline & Regional

                

Revenue passenger miles (millions)

     59,564        58,336        2.1     110,548        110,106        0.4

Available seat miles (millions)

     71,743        70,751        1.4     136,083        135,815        0.2

Cargo ton miles (millions)

     701        610        15.1     1,321        1,153        14.5

Passenger load factor (percent)

     83.0        82.5        0.5 pts      81.2        81.1        0.1 pts 

Yield (cents)

     16.09        15.42        4.3     16.04        15.51        3.4

Passenger revenue per ASM (cents)

     13.36        12.71        5.0     13.03        12.58        3.6

Total revenue per ASM (cents)

     15.48        14.65        5.7     15.23        14.58        4.5

Cargo yield per ton mile (cents)

     27.98        28.48        (1.7 )%      27.88        29.09        (4.1 )% 

Passenger enplanements (thousands)

     51,816        51,951        (0.3 )%      98,176        98,866        (0.7 )% 

Aircraft at end of period

     1,583        1,547        2.3     1,583        1,547        2.3

Fuel consumption (gallons in millions)

     1,129        1,122        0.6     2,143        2,155        (0.6 )% 

Average aircraft fuel price including related taxes (dollars per gallon)

     1.63        1.42        14.7     1.66        1.32        26.0

Full-time equivalent employees at end of period (B)

     128,300        123,500        3.9     128,300        123,500        3.9

Operating cost per ASM (cents)

     13.34        12.17        9.6     13.66        12.30        11.0

Operating cost per ASM excluding special items (cents)

     13.06        12.08        8.1     13.42        12.18        10.2

Operating cost per ASM excluding special items and fuel (cents)

     10.49        9.83        6.8     10.81        10.09        7.1

 

(A) Regional includes wholly owned regional airline subsidiaries and operating results from capacity purchase carriers.
(B) Regional full-time equivalent employees only include our wholly owned regional airline subsidiaries.

Note: Amounts may not recalculate due to rounding.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 7

 

American Airlines Group Inc.

Consolidated Revenue Statistics by Region

(Unaudited)

 

     3 Months Ended
June 30,
           6 Months Ended
June 30,
        
     2017      2016      Change     2017      2016      Change  

Domestic - Mainline

                

Revenue passenger miles (millions)

     32,779        33,418        (1.9 )%      62,310        63,808        (2.3 )% 

Available seat miles (ASM) (millions)

     38,092        38,701        (1.6 )%      73,897        75,244        (1.8 )% 

Passenger load factor (percent)

     86.1        86.3        (0.2 )pts      84.3        84.8        (0.5 )pts 

Yield (cents)

     15.55        14.47        7.4     15.44        14.59        5.8

Passenger revenue per ASM (cents)

     13.38        12.49        7.1     13.02        12.37        5.2

Domestic Consolidated - Mainline and

                

Total Regional (A)

                

Revenue passenger miles (millions)

     39,166        39,826        (1.7 )%      74,470        75,767        (1.7 )% 

Available seat miles (millions)

     46,315        46,782        (1.0 )%      89,897        90,825        (1.0 )% 

Passenger load factor (percent)

     84.6        85.1        (0.5 )pts      82.8        83.4        (0.6 )pts 

Yield (cents)

     17.70        16.63        6.4     17.46        16.65        4.8

Passenger revenue per ASM (cents)

     14.96        14.15        5.7     14.46        13.89        4.1

Latin America

                

Revenue passenger miles (millions)

     7,592        7,421        2.3     15,082        15,476        (2.5 )% 

Available seat miles (millions)

     9,739        9,469        2.9     19,513        19,949        (2.2 )% 

Passenger load factor (percent)

     78.0        78.4        (0.4 )pts      77.3        77.6        (0.3 )pts 

Yield (cents)

     14.64        12.65        15.7     14.76        13.24        11.5

Passenger revenue per ASM (cents)

     11.41        9.91        15.1     11.41        10.27        11.1

Atlantic

                

Revenue passenger miles (millions)

     8,849        7,879        12.3     13,349        12,680        5.3

Available seat miles (millions)

     10,927        10,677        2.3     17,342        17,570        (1.3 )% 

Passenger load factor (percent)

     81.0        73.8        7.2 pts      77.0        72.2        4.8 pts 

Yield (cents)

     13.04        14.34        (9.1 )%      13.20        14.39        (8.3 )% 

Passenger revenue per ASM (cents)

     10.56        10.58        (0.2 )%      10.16        10.38        (2.2 )% 

Pacific

                

Revenue passenger miles (millions)

     3,957        3,209        23.3     7,647        6,183        23.7

Available seat miles (millions)

     4,762        3,823        24.6     9,331        7,471        24.9

Passenger load factor (percent)

     83.1        83.9        (0.8 )pts      82.0        82.8        (0.8 )pts 

Yield (cents)

     9.75        9.52        2.4     9.78        9.60        1.9

Passenger revenue per ASM (cents)

     8.10        7.99        1.3     8.01        7.94        0.9

Total International

                

Revenue passenger miles (millions)

     20,398        18,509        10.2     36,078        34,339        5.1

Available seat miles (millions)

     25,428        23,969        6.1     46,186        44,990        2.7

Passenger load factor (percent)

     80.2        77.2        3.0 pts      78.1        76.3        1.8 pts 

Yield (cents)

     13.00        12.83        1.3     13.12        13.01        0.9

Passenger revenue per ASM (cents)

     10.42        9.90        5.3     10.25        9.93        3.3

(A) Revenue statistics for all Regional flying are included herein.

Note: Amounts may not recalculate due to rounding.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 8

 

Reconciliation of GAAP Financial Information to Non-GAAP Financial Information

American Airlines Group Inc. (the “Company”) sometimes uses financial measures that are derived from the consolidated financial statements but that are not presented in accordance with GAAP to understand and evaluate its current operating performance and to allow for period-to-period comparisons. The Company believes these non-GAAP financial measures may also provide useful information to investors and others. These non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies, and should be considered in addition to and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with GAAP. The Company is providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The tables below present the reconciliations of the following GAAP measures to their non-GAAP measure:

 

   

Pre-Tax Income (GAAP measure) to Pre-Tax Income Excluding Special Items (non-GAAP measure)

 

   

Pre-Tax Margin (GAAP measure) to Pre-Tax Margin Excluding Special Items (non-GAAP measure)

 

   

Net Income (GAAP measure) to Net Income Excluding Special Items (non-GAAP measure)

 

   

Basic and Diluted Earnings Per Share (GAAP measure) to Basic and Diluted Earnings Per Share Excluding Special Items (non-GAAP measure)

 

   

Operating Income (GAAP measure) to Operating Income Excluding Special Items (non-GAAP measure)

Management uses these non-GAAP financial measures to evaluate the Company’s current operating performance and to allow for period-to-period comparisons. As special items may vary from period-to-period in nature and amount, the adjustment to exclude special items allows management an additional tool to better understand the Company’s core operating performance.

Additionally, the tables below present the reconciliations of mainline, regional and total operating costs (GAAP measure) to mainline, regional and total operating costs excluding special items and fuel (non-GAAP measure). Management uses mainline, regional and total operating costs excluding special items and fuel to evaluate the Company’s current operating performance and for period-to-period comparisons. The price of fuel, over which the Company has no control, impacts the comparability of period-to-period financial performance. The adjustment to exclude aircraft fuel and special items allows management an additional tool to better understand and analyze the Company’s non-fuel costs and core operating performance.

 

     3 Months Ended
June 30,
    Percent
Change
    6 Months Ended
June 30,
    Percent  
Reconciliation of Pre-Tax Income Excluding Special Items    2017     2016       2017     2016     Change  
     (in millions)           (in millions)        

Pre-tax income as reported

   $ 1,291     $ 1,493       $ 1,656     $ 2,610    

Pre-tax special items:

            

Special items, net (1)

     202       62         320       161    

Regional operating special items, net

     1       3         4       8    

Nonoperating special items, net (2)

     2       36         7       36    
  

 

 

   

 

 

     

 

 

   

 

 

   

Total pre-tax special items

     205       101         331       205    

Pre-tax income excluding special items

   $ 1,496     $ 1,594       -6   $ 1,987     $ 2,815       -29

Calculation of Pre-Tax Margin

                                    

Pre-tax income as reported

   $ 1,291     $ 1,493       $ 1,656     $ 2,610    

Total operating revenues as reported

   $ 11,105     $ 10,363       $ 20,729     $ 19,798    

Pre-tax margin

     11.6     14.4       8.0     13.2  

Calculation of Pre-Tax Margin Excluding Special Items

                                    

Pre-tax income excluding special items

   $ 1,496     $ 1,594       $ 1,987     $ 2,815    

Total operating revenues as reported

   $ 11,105     $ 10,363       $ 20,729     $ 19,798    

Pre-tax margin excluding special items

     13.5     15.4       9.6     14.2  

Reconciliation of Net Income Excluding Special Items

                                    

Net income as reported

   $ 803     $ 950       $ 1,037     $ 1,650    

Special items:

            

Total pre-tax special items (1) (2)

     205       101         331       205    

Net tax effect of special items

     (64     (50       (116     (89  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income excluding special items

   $ 944     $ 1,001       -6   $ 1,252     $ 1,766       -29


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 9

 

Reconciliation of Basic and Diluted Earnings Per Share Excluding Special Items

   3 Months Ended
June 30,
    6 Months Ended
June 30,
 
   2017     2016     2017     2016  
     (in millions, except per share amounts)     (in millions, except per share amounts)  

Net income excluding special items

   $ 944     $ 1,001     $ 1,252     $ 1,766  

Shares used for computation (in thousands):

        

Basic

     490,818       563,000       497,360       584,622  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     492,965       566,040       500,381       588,764  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share excluding special items:

        

Basic

   $ 1.92     $ 1.78     $ 2.52     $ 3.02  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.92     $ 1.77     $ 2.50     $ 3.00  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Operating Income Excluding Special Items

                        

Operating income as reported

   $ 1,535     $ 1,751     $ 2,136     $ 3,087  

Special items:

        

Special items, net (1)

     202       62       320       161  

Regional operating special items, net

     1       3       4       8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income excluding special items

   $ 1,738     $ 1,816     $ 2,460     $ 3,256  

Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Mainline only

   3 Months Ended
June 30,
    6 Months Ended
June 30,
 
   2017     2016     2017     2016  
     (in millions)     (in millions)  

Total operating expenses as reported

   $ 9,570     $ 8,612     $ 18,593     $ 16,711  

Less regional expenses as reported:

        

Fuel

     (329     (279     (648     (498

Other

     (1,291     (1,239     (2,546     (2,452
  

 

 

   

 

 

   

 

 

   

 

 

 

Total mainline operating expenses as reported

     7,950       7,094       15,399       13,761  

Special items, net (1)

     (202     (62     (320     (161
  

 

 

   

 

 

   

 

 

   

 

 

 

Mainline operating expenses, excluding special items

     7,748       7,032       15,079       13,600  

Aircraft fuel and related taxes

     (1,510     (1,314     (2,912     (2,343
  

 

 

   

 

 

   

 

 

   

 

 

 

Mainline operating expenses, excluding special items and fuel

   $ 6,238     $ 5,718     $ 12,167     $ 11,257  
     (in cents)       (in cents)  

Mainline operating expenses per ASM as reported

     12.51       11.32       12.82       11.45  

Special items, net per ASM (1)

     (0.32     (0.10     (0.27     (0.13
  

 

 

   

 

 

   

 

 

   

 

 

 

Mainline operating expenses per ASM, excluding special items

     12.20       11.22       12.56       11.31  

Aircraft fuel and related taxes per ASM

     (2.38     (2.10     (2.42     (1.95
  

 

 

   

 

 

   

 

 

   

 

 

 

Mainline operating expenses per ASM, excluding special items and fuel

     9.82       9.12       10.13       9.36  

Note: Amounts may not recalculate due to rounding.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 10

 

Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Regional only

   3 Months Ended
June 30,
    6 Months Ended
June 30,
 
     2017     2016     2017     2016  
     (in millions)     (in millions)  

Total regional operating expenses as reported

   $ 1,620     $ 1,518     $ 3,194     $ 2,950  

Regional operating special items, net

     (1     (3     (4     (8
  

 

 

   

 

 

   

 

 

   

 

 

 

Regional operating expenses, excluding special items

     1,619       1,515       3,190       2,942  

Aircraft fuel and related taxes

     (329     (279     (648     (498
  

 

 

   

 

 

   

 

 

   

 

 

 

Regional operating expenses, excluding special items and fuel

   $ 1,290     $ 1,236     $ 2,542     $ 2,444  
     (in cents)     (in cents)  

Regional operating expenses per ASM as reported

     19.71       18.78       19.96       18.94  

Regional operating special items, net per ASM

     (0.02     (0.03     (0.03     (0.05
  

 

 

   

 

 

   

 

 

   

 

 

 

Regional operating expenses per ASM, excluding special items

     19.69       18.75       19.94       18.88  

Aircraft fuel and related taxes per ASM

     (4.01     (3.46     (4.05     (3.20
  

 

 

   

 

 

   

 

 

   

 

 

 

Regional operating expenses per ASM, excluding special items and fuel

     15.69       15.29       15.89       15.68  

Note: Amounts may not recalculate due to rounding.

        

Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel - Total Mainline and Regional

   3 Months Ended
June 30,
    6 Months Ended
June 30,
 
     2017     2016     2017     2016  
     (in millions)     (in millions)  

Total operating expenses as reported

   $ 9,570     $ 8,612     $ 18,593     $ 16,711  

Special items:

        

Special items, net (1)

     (202     (62     (320     (161

Regional operating special items, net

     (1     (3     (4     (8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses, excluding special items

     9,367       8,547       18,269       16,542  

Fuel:

        

Aircraft fuel and related taxes - mainline

     (1,510     (1,314     (2,912     (2,343

Aircraft fuel and related taxes - regional

     (329     (279     (648     (498
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses, excluding special items and fuel

   $ 7,528     $ 6,954     $ 14,709     $ 13,701  
     (in cents)     (in cents)  

Total operating expenses per ASM as reported

     13.34       12.17       13.66       12.30  

Special items per ASM:

        

Special items, net (1)

     (0.28     (0.09     (0.24     (0.12

Regional operating special items, net

     —         —         —         (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses per ASM, excluding special items

     13.06       12.08       13.42       12.18  

Fuel per ASM:

        

Aircraft fuel and related taxes - mainline

     (2.10     (1.86     (2.14     (1.73

Aircraft fuel and related taxes - regional

     (0.46     (0.39     (0.48     (0.37
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses per ASM, excluding special items and fuel

     10.49       9.83       10.81       10.09  

Note: Amounts may not recalculate due to rounding.

FOOTNOTES:

 

(1)

The 2017 second quarter mainline operating special items totaled a net charge of $202 million, which principally included $68 million of merger integration expenses, $48 million of fleet restructuring expenses, $45 million of labor contract expenses principally due to one-time charges to adjust the vacation accruals for pilots and flight attendants as a result of the mid-contract pay rate adjustments and a $38 million net charge resulting from fair value adjustments to bankruptcy obligations. The 2017 six month period mainline operating special items totaled a net charge of $320 million, which principally included $130 million of merger integration expenses, $111 million of fleet restructuring expenses, $45 million for the labor contract expenses described above and a $20 million net charge resulting from fair value adjustments to bankruptcy obligations.

The 2016 second quarter mainline operating special items totaled a net charge of $62 million, which principally included $97 million of merger integration expenses and $15 million of fleet restructuring expenses, offset in part by a $56 million net credit resulting from fair value adjustments to bankruptcy obligations. The 2016 six month period mainline operating special items totaled a net charge of $161 million, which principally included $201 million of merger integration expenses and $41 million of fleet restructuring expenses, offset in part by a $61 million net credit resulting from fair value adjustments to bankruptcy obligations.

Merger integration expenses included costs related to information technology, professional fees, re-branding of aircraft and airport facilities and training. Additionally, the 2016 period also included merger integration expenses related to alignment of labor union contracts, re-branded uniforms, relocation and severance. Fleet restructuring expenses driven by the merger principally included the acceleration of aircraft depreciation and impairments for aircraft grounded or expected to be grounded earlier than planned.

 

(2)

Nonoperating special charges in the 2017 periods primarily consisted of debt issuance and extinguishment costs associated with term loan refinancings. Additionally, the 2016 periods included costs associated with a bond refinancing.


American Airlines Group Reports Second-Quarter Results

July 28, 2017

Page 11

 

American Airlines Group Inc.

Condensed Consolidated Balance Sheets

(In millions)

 

     June 30, 2017     December 31, 2016  
     (unaudited)        

Assets

    

Current assets

    

Cash

   $ 386     $ 322  

Short-term investments

     6,500       6,037  

Restricted cash and short-term investments

     554       638  

Accounts receivable, net

     1,543       1,594  

Aircraft fuel, spare parts and supplies, net

     1,206       1,094  

Prepaid expenses and other

     827       639  
  

 

 

   

 

 

 

Total current assets

     11,016       10,324  

Operating property and equipment

    

Flight equipment

     39,329       37,028  

Ground property and equipment

     7,580       7,116  

Equipment purchase deposits

     1,212       1,209  
  

 

 

   

 

 

 

Total property and equipment, at cost

     48,121       45,353  

Less accumulated depreciation and amortization

     (15,128     (14,194
  

 

 

   

 

 

 

Total property and equipment, net

     32,993       31,159  

Other assets

    

Goodwill

     4,091       4,091  

Intangibles, net

     2,224       2,173  

Deferred tax asset

     905       1,498  

Other assets

     2,107       2,029  
  

 

 

   

 

 

 

Total other assets

     9,327       9,791  
  

 

 

   

 

 

 

Total assets

   $ 53,336     $ 51,274  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Current maturities of long-term debt and capital leases

   $ 2,334     $ 1,855  

Accounts payable

     1,924       1,592  

Accrued salaries and wages

     1,295       1,516  

Air traffic liability

     5,222       3,912  

Loyalty program liability

     3,014       2,789  

Other accrued liabilities

     2,323       2,208  
  

 

 

   

 

 

 

Total current liabilities

     16,112       13,872  

Noncurrent liabilities

    

Long-term debt and capital leases, net of current maturities

     22,525       22,489  

Pension and postretirement benefits

     7,500       7,842  

Other liabilities

     3,484       3,286  
  

 

 

   

 

 

 

Total noncurrent liabilities

     33,509       33,617  

Stockholders’ equity

    

Common stock

     5       5  

Additional paid-in capital

     6,245       7,223  

Accumulated other comprehensive loss

     (5,112     (5,083

Retained earnings

     2,577       1,640  
  

 

 

   

 

 

 

Total stockholders’ equity

     3,715       3,785  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 53,336     $ 51,274