American Airlines Group (AAL - Analyst Report) reported higher-than-expected earnings in the second quarter of 2015. The company recorded adjusted earnings per share of $2.62, beating the Zacks Consensus Estimate by 3 cents.
The earnings beat pleased the investors, resulting in shares of the company gaining value in pre-market trading.
American Airlines Group Inc. - Earnings Surprise | FindTheBest
Share American Airlines Group reported operating revenues of $10.83 billion in the second quarter, representing a 4.6% decrease over the comparable figure in the year-ago period. Quarterly revenues were lower than the Zacks Consensus Estimate of $10.93 billion.
Consolidated passenger revenue per available seat miles (PRASM) declined 6.9% to 13.57 cents in the reported quarter. Consolidated passenger yield declined 6.1% to 16.28 cents. Consolidated load factor (% of seats filled by passengers) declined to 83.3% from the comparable year-ago figure of 84%. Load factor declined 70 basis points (bps) domestically and 120 bps on the international front.
American Airlines’ results in the reported quarter benefited from low fuel costs. This is because fuel costs account for a major chunk of an airline's operating expenses. Total operating expenses declined 10.5% to $8.9 billion on the back of a 36.9% reduction in fuel costs.
The company looks to return more to shareholders through dividends and share repurchases. During the second quarter, the company bought back shares worth in excess of $750 million and declared quarterly dividend of 10 cents per share. The dividend will be paid on Aug 24, 2015, to shareholders of record as of Aug 10.
Moreover, the board of directors has authorized an additional $2 billion share buyback program. We are impressed by the company’s efforts to reward shareholders consistently through stock repurchases and dividend payments.
Upcoming Release
JetBlue Airways (JBLU - Analyst Report) will release its second quarter earnings numbers on Jul 28, 2015.
Integration Process Almost Complete
American Airlines Group, formed following the Dec 2013 merger between AMR (American Airlines' parent group, founded in 1934) and US Airways, was recently in news for the announcement that the final flights under the US Airways brand name are scheduled to take off on Oct 16, 2015.
The US Airways brand will thus cease to exist as of Oct 17. From that day, there will be a single website and reservations system (all under the American Airlines brand). The flights departing on Oct 16 evening from San Francisco to Philadelphia and from Phoenix to Denver will be the final flights under the US airways brand.
The carrier announced that all reservations made for US Airways flights from Jul 17 are being transferred gradually to the American Airlines system. The process will be completed 3 months after its starting date. The 3-month window for the transfer is aimed at avoiding technical glitches.
We remind investors that the integration process took a giant step forward in April this year when the Federal Aviation Administration granted a single operating certificate to American Airlines. Moreover, the clubbing of US Airways’ Dividend Miles frequent flyer plan with American Airlines’ AAdvantage loyalty program earlier in the year marked a great milestone in the successful integration of the entities.
Zacks Rank
Currently, American Airlines Group has a Zacks Rank #4 (Sell). Better-ranked stocks in the airline space are Deutsche Lufthansa Aktiengesellschaft (DLAKY -Snapshot Report) and Alaska Air Group (ALK - Snapshot Report) with a Zacks Rank #2 (Buy) each.
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