Returns to shareholders
American’s operational and financial performance has improved considerably after the merger with US Airways, and it has reported record profits in every quarter of 2014. The company’s management is confident that the momentum will continue through the rest of the year as well.
The investors’ regained confidence in the company is reflected in the rise in its share prices. American Airlines’s share price almost doubled during 2014 and closed at $50.82 on December 8, 2014, up from $25.36 in the beginning of the year. Its share price rose ~4% on October 23, 2014, after American announced record revenues and net profits yet again during the third quarter.
American also declared a dividend of $0.10 per share to be paid in August 2014. During the quarter, American paid $72 million as dividends and repurchased 2.9 million shares at $113 million. This is the first dividend declared by American (AAL) since 1980.
American Airlines, like all other major US airlines, outperformed the Standard & Poors 500 index. While the S&P 500 index has risen only by 13% since the beginning of 2014, the airline index has risen by ~40%. American Airlines’s and Southwest’s share prices have doubled since the beginning of the year.
Here is a comparison of American’s share price growth during 2014 with that of its peers:
- Southwest Airlines Co. (LUV) – 117%
- American Airlines (AAL) – 90%
- JetBlue Airways Corporation (JBLU) – 72%
- Delta Air Lines, Inc. (DAL) – 62%
- United Continental Holdings Inc. (UAL) – 57%
- Alaska Air Group, Inc. (ALK) – 55%
The rising share prices have benefited the investors holding stocks in the airline companies, as well as in ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN), which have major holdings in airline stocks.