- American Airlines recently reported its Q3 2019 pre-tax income of USD 557 million and net income of USD 425 million. Excluding net special items, both pre-tax income and net income rose more than 15% YoY to USD 835 million and USD 630 million, respectively.
- Third-quarter earnings were USD 0.96 per diluted share. Excluding net special items, earnings per share grew 20% YoY to USD 1.42 per diluted share.
- Reported record Q3 revenue of USD 11.9 billion. Also reported Q3 total revenue per available seat mile (TRASM) of 15.71 cents, an increase of 2% YoY. This marks the 12th consecutive quarter of TRASM growth.
- Returned USD 244 million to shareholders in the form of dividends and share repurchases in Q3.
PRESS RELEASE
FORT WORTH, Texas — American Airlines Group Inc. (NASDAQ: AAL) today reported its third-quarter 2019 results, including these highlights:
- Reported third-quarter 2019 pre-tax income of $557 million and net income of $425 million. Excluding net special items, both pre-tax income and net income rose more than 15% year over year to $835 million and $630 million,1 respectively.
- Third-quarter earnings were $0.96 per diluted share. Excluding net special items, earnings per share grew 20% year over year to $1.42 per diluted share1.
- Reported record third-quarter revenue of $11.9 billion. Also reported third-quarter total revenue per available seat mile (TRASM) of 15.71 cents, an increase of 2% year over year. This marks the 12th consecutive quarter of TRASM growth.
- Returned $244 million to shareholders in the form of dividends and share repurchases in the third quarter.
“We are pleased to report an earnings increase of 15% and earnings per share growth of 20% for the third quarter, excluding net special items” said Chairman and CEO Doug Parker. “However, we know that our results should have been better. Our third quarter was impacted by the continued grounding of the Boeing 737 MAX and the operational challenges resulting from ongoing labor contract negotiations. These challenges affected our customers, our shareholders and our team members, who we thank for their hard work and perseverance.”
“We are taking decisive action to correct this performance and are excited about our prospects for 2020 and beyond. As we look forward, we are committed to restoring operational excellence, growing efficiently and profitably, and generating significant free cash flow for our investors.”
Third-Quarter Revenue and Expenses
Pre-tax earnings excluding net special items for the third quarter of 2019 were $835 million, a 16% year-over-year increase from the third quarter of 2018. Excluding net special items, net income was $630 million, or $1.42 per diluted share.
| GAAP | Non-GAAP 1 | |||||||
| 3Q19 | 3Q18 | 3Q19 | 3Q18 | |||||
| Operating income ($ mil) | 808 | 685 | 1,042 | 894 | ||||
| Pre-tax income ($ mil) | 557 | 496 | 835 | 720 | ||||
| Pre-tax margin | 4.7% | 4.3% | 7.0% | 6.2% | ||||
| Net income ($ mil) | 425 | 372 | 630 | 547 | ||||
| Earnings per diluted share | $ | 0.96 | $ | 0.81 | $ | 1.42 | $ | 1.19 |
Strong passenger demand drove a 3% year-over-year increase in third-quarter 2019 total revenue to a record $11.9 billion. Driven by a 3 percentage point increase in total passenger load factor, passenger revenue per available seat mile (PRASM) grew 3% to a record 14.50 cents. Cargo revenue decreased 20% to $208 million due primarily to a 17% decrease in cargo ton miles. Other revenue was down 4% to $708 million. Third-quarter 2019 TRASM increased by 2% year over year to a record 15.71 cents on a 1% increase in total available seat miles, marking the 12th consecutive quarter of growth.
Total third-quarter 2019 operating expenses were $11.1 billion, up 2% year over year. Total operating cost per available seat mile (CASM) was 14.64 cents in the third quarter of 2019, up 1% from the third quarter of 2018. Excluding fuel and net special items, third-quarter 2019 CASM was 11.07 cents, up 5% year over year due primarily to higher salaries and benefits, maintenance and regional expense, and lower than planned capacity.
DFW 900
Earlier this summer, American embarked on a network expansion project by adding approximately 100 daily departures at its largest hub, Dallas Fort Worth International Airport (DFW). The results have surpassed initial expectations, and, in the third quarter, the company grew domestic capacity at DFW by 9% and produced PRASM growth of 3.5% compared to 2018. This is the largest expansion of capacity at any hub in the U.S. in more than a decade and sets a positive precedent for American’s planned expansions next year at Charlotte Douglas International Airport and Ronald Reagan Washington National Airport in 2021.
Fleet Update
On March 13, a directive from the Federal Aviation Administration (FAA) grounded all U.S.-registered Boeing 737 MAX aircraft. The American fleet currently includes 24 MAX aircraft with an additional 76 aircraft on order, of which five were scheduled to be delivered in the third quarter. As a result of this directive, American canceled 9,475 flights in the third quarter of 2019. The company estimates that the cancellations in the third quarter negatively impacted pre-tax income by approximately $140 million.
The company has removed all MAX flying from its flight schedule through Jan. 15, 2020. With the flight cancellations extending through the remainder of 2019, the company now expects the MAX cancellations will negatively impact its full-year 2019 pre-tax income by approximately $540 million.
Operations
American has seen recent improvement in key operational metrics, including on-time departures and arrivals. The company’s on-time performance in September was its best performance in almost two years, and this improvement has continued into October.
American Airlines President Robert Isom said, “We continue to strengthen our operations with ongoing enhancements, including retiring older aircraft, simplifying our fleet and schedule, and fortifying our maintenance and airport resources. Our underlying execution is solid, and we are committed to returning American to a position of operational excellence.”
Share Repurchases and Dividends
American returned $200 million to shareholders through the repurchase of 7.3 million shares and also paid $44 million in dividends in the third quarter. The company has approximately $850 million remaining of its existing $2 billion share repurchase authorization2. In aggregate, American has returned more than $13 billion to shareholders over the past five years through share repurchases and dividends.
American also declared a dividend of 10 cents per share to be paid Nov. 20 to stockholders of record as of Nov. 6, 2019.
Guidance and Investor Update
American expects its fourth-quarter 2019 TRASM to be flat to up 2% year over year. The company also expects its fourth-quarter 2019 pre-tax margin excluding net special items to be between 5% and 7%3. Based on today’s guidance, American expects its 2019 diluted earnings per share excluding net special items to be between $4.50 and $5.503.
