MIAMI — American Airlines Group (AAL) have today (January 25) released their fourth quarter and 2017 overall performance results, displaying the financial and operational results of both the whole year as well as the last three months of 2017.
For their full 2017 results, AAL is reporting a pre-tax profit of $3.1 billion as well as a full year net profit of $1.9 billion, showing a decrease in profit by around $757 million.
Regarding the fourth quarter of 2017, they made a pre-tax profit of $455 million as well as a net profit of $258 million—a decrease of around $31 million compared to the previous 4Q results for 2016, which were at $289 million.
The company’s share value went down also in 2017 from $4.81 in 2016 to $3.90 per diluted share the previous year, highlighting an overall decrease in value of the group.
The reduction in profits in comparison to the previous year is having effects on their overall stock value. However, Doug Parker, CEO of American Airlines Group, believes that 2017 has been very positive.
“2017 was a remarkable year for American Airlines. We made enormous progress as a company as we continued to make significant investments in our team members, product, and operation, and those investments are beginning to pay off,” he said.
Parker reaffirms that his operation “continues to deliver record-setting performance (…) and the credit goes to our team members who are simply the best in the business.”
Passenger, Cargo Demand On The Rise
The close-in demand and yields have seen an 8.3% increase in fourth-quarter total revenue, to $10.6 billion.
Concerning geographical perspectives, yields had grown 11.0% through trans-Atlantic traffic, as well as a 7.9% increase in Latin America.
The Group’s cargo revenue has grown sharply by nearly 20% to $232 million. AAL say this is due to the higher volumes and a 6.7% increase in yield.
Regarding other revenues gained from other aspects of the group, these have also grown by around 8.1% to $1.3 billion.
Results may have dipped compared to the previous year due to the 4Q17 reports showing a 9.8% increase in operating expenses, exceeding $9.9 billion, placing the reasoning to “consolidated fuel expense and a 7% increase in salaries and benefits resulting from the company’s investments in its team members.”
On top of this was the cost per available seat mile (CASM), which also went up 7% to 14.71 cents.
American has been able to return $1.7 billion to shareholders through repurchasing and dividends, bringing the total given since the AAL-US merger to $11.4 billion.
American’s Think Forward, Lean Forward Strategy
As part of American’s Think Forward, Lean Forward strategy, they looked at potential expansions of the group to take from 2017 into 2018. AAL:
- Announced a $200 million equity stake in China Southern Airlines, leading to significant codesharing agreements going into China and the Far East.
- Executed an amended and restated trans-Atlantic Joint Business Agreement that extends the term of the agreement with the company’s partners.
- Adopted next-generation technology such as cloud hosting and machine learning to speed time to value.
- Announced a commitment for more than $1.6 billion for improvements of LAX Terminals 4 and 5, setting the stage for American to receive additional gate space, strengthen its Pacific gateway and hope to be the pre-eminent airline for the Los Angeles area.
- Built a five-gate expansion at Chicago O’Hare Terminal 3, which is expected to open in April 2018, giving American what they believe to be a new advantage at what is a key competitive hub.
Doug Parker believes that this strategy will allow the airline to “lead for the long term.”
“This means we must be more nimble in our problem solving and in how we innovate and develop the right products, technology, and network both for customers of today and the future,” he said.
Such expansive measures will allow the airline to place their $4.1 billion worth of brand-new aircraft into these terminal expansions and growth strategy of their operations portfolios. Such developments in their aircraft numbers mean that they will launch the following routes in the Summer:
- Philadelphia to Prague, Czech Republic, and Budapest, Hungary
- Dallas-Fort Worth to Reykjavik-Keflavik, Iceland
- Chicago-O’Hare to Venice, Italy
Although American has lost some ground in their 2017 results compared to the previous year, they have still hit substantial profit numbers and will appear to regain any lost momentum going into 2018, as they expect to make huge returns on their investments made.
“We enter 2018 with strong momentum. Demand for American’s reliable, friendly service remains strong, our network is expanding, and the products we are bringing to market are resonating with customers,” Parker said.
With the industry hosting many difficulties such as rising fuel costs and cost per seat, it is good that the loss of profit has been very minimal for American and the group will continue to grow going into 2018.