AMR Corporation, the parent company of American Airlines, Inc., this week reported second quarter revenue of $6.5 billion, an increase of 5.5 percent year-over-year and the highest quarterly revenue in company history.
In the second quarter of 2012, the company reported a net profit of $95 million, excluding reorganization and special items – a $381 million improvement over the second quarter of 2011. AMR incurred a net loss of $241 million compared to a net loss of $286 million in the same period of 2011.
“Thanks to the great work of the entire American team, this was a time of exceptional improvement. Our revenue performance has topped the industry for several months, leading to our first second quarter profit in five years excluding reorganization and special items,” said Tom Horton, AMR’s Chairman and Chief Executive Officer. “And this improvement reflects only a fraction of our ongoing restructuring progress. While there is still much to be done, we expect this momentum to build quickly as the new American re-emerges as an industry leader.”
Financial and Operational Performance
Consolidated passenger revenue per available seat mile (unit revenue) grew 9.1 percent compared to the second quarter of 2011, and mainline passenger unit revenue increased 8.7 percent.
- Consolidated passenger yield, representing average fares paid, increased 7.1 percent year-over-year in the second quarter of 2012, and mainline passenger yield increased 6.8 percent.
- Mainline capacity, or total available seat miles, in the second quarter of 2012 decreased 2.4 percent compared to the same period in 2011.
- American’s second quarter 2012 mainline load factor, or the percentage of total seats filled, was 85.1 percent – a record for any quarter.
The company’s revenue performance was driven by year-over-year yield improvement and a higher consolidated load factor of 84.5 percent – a record for any quarter as well. Domestic unit revenue improved 8.6 percent in the second quarter versus the same period last year and, for the second consecutive quarter, the company experienced unit revenue increases across all five of its hubs. These results were supported by strong corporate revenue growth.
International unit revenue increased 9.0 percent in the second quarter, driven by increased load factors across all entities, and strong yield performance. Premium cabin demand improved significantly in both the Atlantic and Pacific entities, generating unit revenue increases of 8.5 percent and 18.1 percent, respectively. American and its joint-business partners, British Airways and Iberia over the Atlantic, and Japan Airlines over the Pacific, have gained momentum in attracting high-value customers to the airlines’ enhanced networks. The Latin American entity posted a 6.7 percent unit revenue increase in the second quarter of 2012, including yield improvements in Mexico and Central and South America.
“Our improved financial results were driven by strong unit revenue performance, with growth outpacing the industry in each of the three months of the second quarter,” said Bella Goren, AMR’s Chief Financial Officer. “Our consolidated unit revenue rose 9.1 percent, with increases across all five of our hubs and across all international entities. These industry-leading year-over-year revenue increases reflect the strength of our network and alliances, our focus on the customer, and the effectiveness of our overall strategy.”
AMR’s consolidated operating expenses, excluding special items, were $6.2 billion, essentially flat with the same period last year. Excluding fuel costs, consolidated unit costs increased 2.3 percent year-over-year.
Reorganization Items and Special Charges
The second quarter 2012 results include $336 million in special charges and reorganization items.
- Of that amount, $106 million is related to a special charge, primarily associated with employee severance-related costs.
- The company recognized $230 million in reorganization items resulting from its and certain of its direct and indirect U.S. subsidiaries’ voluntary petitions for reorganization under Chapter 11 on Nov. 29, 2011. These items are primarily from estimated claims associated with restructuring the financing arrangements for certain aircraft and rejecting certain special facility revenue bonds, as well as professional fees.
Taking into account the impact of fuel hedging, AMR paid approximately $3.24 per gallon for jet fuel in the second quarter of 2012 versus approximately $3.12 per gallon in the second quarter of 2011, a 3.8 percent increase. As a result, the company paid $81 million more for fuel in the second quarter of 2012 than it would have paid at prevailing prices from the prior-year period.
AMR ended the second quarter with approximately $5.8 billion in cash and short-term investments, including a restricted cash balance of $772 million, compared to a balance of approximately $5.6 billion in cash and short-term investments, including a restricted balance of approximately $457 million, at the end of the second quarter of 2011.
At Nov. 30, 2011, the company had approximately $4.8 billion in cash and short-term investments, including a restricted cash balance of $693 million.
Fleet Renewal Progress
Later this year, the company will start placing into service the newest addition to its fleet, the Boeing 777-300ER, which will showcase a number of special features, including fully lie-flat First and Business Class seating, with direct aisle access from every seat; specially designed Main Cabin Extra seating with more legroom and comfort; international Wi-Fi and in-seat entertainment throughout all cabins.
In addition, the company recently unveiled plans for upgrading its international widebody fleet of Boeing 777-200ERs and Boeing 767-300ERs, which will also offer industry-leading interiors and amenities as well as fully lie-flat Business Class seats with aisle access for every seat.