News Column

American Airlines soars to second quarter profit

July 24, 2014

By Ely Portillo, The Charlotte Observer



July 24--American Airlines said Thursday that its second quarter profit jumped 70 percent from a year ago, as executives at the company declared its recent merger with US Airways on track to be a success.

Revenue rose 10.2 percent from a year ago to $11.4 billion, driven by strong demand and rising prices. American flew 51 million passengers during the quarter, up 3 percent. Profits totaled $864 million.

The Fort Worth-based company also reinstated a quarterly dividend for the first time in more than three decades, starting at 10 cents a share, an announced plans to buy back $1 billion worth of its stock.

"The fact that we are able to implement this program while still funding our significant product improvements, fleet renewal program and integration costs is further evidence of the success of our merger," said chief executive Doug Parker, in a statement.

Charlotte is American's second-busiest hub, with 650 daily flights and more than 10,000 employees based in the city. Since merging with US Airways in December, the airline's dominance in Charlotte has grown: American operates more than 90 percent of daily flights to and from the city.

Analysts have said they expect strong earnings from most airlines this quarter, as travel demand rises and fuel prices remain stable. And airlines have obliged, posting big jumps in their quarterly profits.

On Wednesday, Delta Air Lines said its second-quarter profits rose 17 percent, to $801 million. Thursday, United Continental Holdings reported its profits shot up 68 percent, to $789 million, and Southwest Airlines said it more than doubled its profits, which totaled $465 million.

American said it would have done even better during the quarter without the added expenses from its merger. Excluding one-time losses, such as $337 million for the sale of its fuel-hedging contracts $163 million worth of merger integration costs, American would have made a $1.5 billion profit.

Executives at American have said they expect to see Charlotte continue as a major domestic hub for American. About 94 percent of the airport's travelers are domestic passengers. And about 80 percent of passengers at Charlotte Douglas are connecting from one flight to another, not starting or ending their trip in Charlotte.

The airline has added direct service to a half-dozen new destinations in the Midwest from Charlotte, such as Evansville, Indiana. And American plans to start a second daily flight from Charlotte to London'sHeathrow Airport in September.

American also started new seasonal, nonstop flights to four European cities this summer -- Brussels, Lisbon, Madrid and Barcelona -- but cut back those flight schedules because of weak demand. The airline plans to cut its daily flight from Charlotte to Rio de Janeiro at the end of the year.

During the second quarter, American benefited from steady fuel prices, typically an airline's biggest expense. The carrier paid an average of $3.03 a gallon, up just 1.5 percent from the same quarter last year. The airline also kept its planes packed, with an average of 84 percent of seats full across all flights.

And the trend of fuller planes was especially pronounced on domestic flights, which make up the majority of flights for most travelers. On those routes, American said 87.3 percent of all seats were full, up from 86.9 percent last year.

International travelers had a bit more breathing room -- 79.4 percent of seats on their flights were full.

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(c)2014 The Charlotte Observer (Charlotte, N.C.)

Visit The Charlotte Observer (Charlotte, N.C.) at www.charlotteobserver.com

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Source: Charlotte Observer (NC)


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