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American Airlines Group Witnessed Record 3Q15 Earnings

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Oct. 28 2015, Published 5:08 p.m. ET

3Q15: Record profits and margins

3Q15 turned out to be the most profitable quarter in history for American Airlines Group (AAL). The airline’s record quarterly profit numbers stood at $1.9 billion, excluding net special charges of $1.6 billion.

This is a growth of 54% year-over-year (or YoY) from the same quarter last year, amounting to diluted earnings per share of $2.77 as compared to 3Q14’s $1.66 diluted earnings per share on a net profit of $942 million. On a GAAP (generally accepted accounting principles) basis, American Airlines’ net profit was $1.7 billion or $2.49 diluted earnings per share.

Apart from record profits, the airline also set a new record. Its 3Q15 pretax margin stood at 17.7%, a growth of 6.7% from last year.

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Lower expenses fuel profits

American Airlines’ 3Q15 revenue fell by 4% YoY to $11,000 million. Decreased expenses fueled the company’s strong boost in profits. The airline’s total operating expenses in the third quarter stood at $8.7 billion, down 11.9% YoY. The major driver behind this was the 43.5% YoY fall in fuel expenses for the airline.

Southwest Airlines’ (LUV) revenue rose by 10.8%, and Alaska Air Group’s (ALK) revenue rose by 3% YoY. The two other major US legacy carriers reported revenue falls. Delta Air Lines’ (DAL) revenue remained relatively flat at -0.6%, and United Continental’s (UAL) revenue fell by 2.4%.

Stock movement

As of October 27, 2015, American Airlines’ stock price is almost flat since it reported its earnings on October 23, 2015. In the same period, United Continental’s stock price rose 6%, Alaska Air’s rose by 1.4%, and Southwest and JetBlue Airways (JBLU) both saw rises of 2%.

Delta Air Lines fell by 1%, and Spirit Airlines (SAVE) was the largest loser, its price falling~20%. The overall market (SPY) remained relatively flat, with -0.32% returns since October 23, 2015.

Series overview

In this 3Q15 post-earnings series, we’ll discuss some of the key developments that took place during the quarter, along with some key operating metrics. We’ll also discuss important updates in the quarter and American Airlines’ plan for the future. Finally, we’ll wrap up the series by looking at American Airlines’ valuation multiple compared to those of its peers.

Next, we’ll look at some of American Airlines’ key operational statistics.

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