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American Airlines Announces Record Profits for 2Q15

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Jul. 30 2015, Published 9:29 p.m. ET

2Q15 results

These second-quarter results represent American Airlines’ (AAL) finest-ever quarterly profit performance. The company reported record earnings of $1.9 billion, or $2.62 per share, for the quarter. This is a huge 27% year-over-year improvement from $1.5 billion in earnings, or $1.98 per share.

Nevertheless, the firm’s quarterly revenues saw a steep decline of 4.6% year-over-year, even though the company’s capacity grew by 1.9% in the quarter. The savings on fuel costs helped the company offset this decline and post strong profits.

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Market reactions

American Airlines stock had been gaining positive momentum for a month. The stock saw a positive push after the company announced its June traffic results. The company then announced its quarterly results on July 24, 2015. Positive expectations saw the stock open about 2% higher at $43.08. And the company reported its best-ever quarterly profits.

Still, this wasn’t enough to overshadow investors’ revenue and PRASM (passenger revenue per available seat mile) concerns, and the stock fell by ~7% to close at $40.21.

With the exception of Alaska (ALK) and JetBlue (JBLU), other major competitors have also seen their stocks decline YTD (year-to-date). United Continental Airlines (UAL) fell by 14%, Delta Air Lines (DAL) fell by 8%, Southwest Airlines (LUV) fell by 13.5%, and American Airlines (AAL) fell by 20%. Meanwhile, ALK and JBLU increased by 22% and 41%, respectively.

These airlines are part of many ETFs, including the iShares Transportation Average ETF (IYT), which invests 16.85% of its holdings in airline stocks.

Company overview

American Airlines Group (AAL) was formed when AMR Corporation merged with U.S. Airways Group in 2011, when the former filed for bankruptcy. The merged company is now among the largest airline in terms of capacity, which is measured by ASM (available seat miles), fleet size, and revenue. It operates an extensive international and domestic network and is the second-largest network in the industry. It’s also the founding member of the Oneworld airline alliance. The two airlines completed their merger in December 2013 and received their single air operator’s certificate on April 8, 2015.

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