Exhibit 99.1
Investor Relations Update
July 24, 2014
On December 9, 2013, the Plan of Reorganization of AMR Corporation became effective and the related merger transaction was completed. As a result, US Airways Group became a wholly-owned subsidiary of the reorganized AMR Corporation (renamed American Airlines Group Inc., or AAG). AAG is providing guidance on a combined basis for 2014. In addition, this guidance reflects certain reclassifications to conform to the new American Airlines Group Inc. financial statement presentation and excludes special items.
General Overview
| • | Pre-tax Margin – The Company expects its third quarter pre-tax margin (excluding special items) to be approximately 10.5 percent to 12.5 percent. |
| • | Capacity – 2014 total system capacity is expected to be up approximately 2.5 percent vs. 2013 primarily due to more active aircraft and larger gauge aircraft replacing smaller gauge legacy aircraft. Full year mainline capacity is also expected to be up approximately 2.5 percent year-over-year, of which international capacity is expected to be up approximately 5 percent and domestic capacity is expected to be up approximately 1 percent vs. 2013. |
| • | Cash – As of June 30, 2014, the Company had approximately $10.3 billion in total cash and short-term investments, of which $882 million was restricted. The Company also has an undrawn revolving credit facility of $1.0 billion. Approximately $791 million of the Company’s unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable exchange rate of 6.53 bolivars to the dollar. This includes approximately $94 million valued at 4.3 bolivars, approximately $611 million valued at 6.3 bolivars and approximately $86 million valued at 10.6 bolivars, with the rate depending on the date the Company submitted its repatriation request to the Venezuelan government. In the first quarter of 2014, the Venezuelan government announced that a newly-implemented system (SICAD I) will determine the exchange rate (which fluctuates as determined by weekly auctions and at June 30, 2014 was 10.6 bolivars to the dollar) for repatriation of cash proceeds from ticket sales after January 1, 2014, and introduced new procedures for approval of repatriation of local currency. The Company is continuing to work with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency. However, pending further repatriation of funds, and due to the significant decrease in demand for air travel resulting from the effective devaluation of the bolivar, the Company recently significantly reduced capacity in this market. The Company is monitoring this situation closely and continues to evaluate its holdings of Venezuelan bolivars for potential impairment. |
| • | Fuel – For the third quarter 2014, AAG expects to pay an average of between $2.93 and $2.98 per gallon of mainline jet fuel (including taxes & hedges). Forecasted volume and fuel prices are provided in the tables below. |
| • | Cargo / Other Revenue – Includes cargo revenue, frequent flyer revenue, ticket change fees, excess/overweight baggage fees, first and second bag fees, contract services, simulator rental, airport clubs and inflight service revenues. |
| • | Taxes / NOL – As of Dec. 31, 2013, AAG had approximately $10.6 billion of net operating losses (NOLs) available to reduce future federal taxable income, the majority of which are expected to be available for use in 2014. The Company also had approximately $4.7 billion of NOLs to reduce future state taxable income, all of which are expected to be available for use in 2014. The Company’s net deferred tax asset, which includes the NOL, is subject to a full valuation allowance. As of Dec. 31, 2013, the tax affected valuation allowances associated with federal and state NOLs approximate $4.6 billion and $0.4 billion, respectively. In accordance with generally accepted accounting principles, utilization of NOLs to offset book taxable income reduces the net deferred tax asset and results in the release of corresponding valuation allowances, which offset the tax provision on our income statement dollar for dollar. The Company may be obligated to record and pay income tax related to certain states and foreign jurisdictions where NOLs may be limited or not available to be used. The Company currently expects this expense to be approximately $5 million or less per quarter in 2014. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Mainline Update
July 24, 2014
Mainline Comments
| • | Combined mainline data includes American Airlines and US Airways operated flights, and all operating expenses are for mainline operated flights only. Please refer to the following page for information pertaining to regional data. |
| • | CASM in the fourth quarter and full year 2014 increased from previous guidance due to a 1.5 percent reduction in fourth quarter capacity. |
| • | Third quarter net aircraft CAPEX and PDP outflows are $1.6 billion higher than previous guidance primarily due to a shift in assumed aircraft financing from the third quarter to the fourth quarter. Full year net aircraft CAPEX and PDP outflows remain unchanged. |
| 1Q14A | 2Q14A | 3Q14E | 4Q14E | FY14E | ||||||||||||||||
| Mainline Guidance |
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| Available Seat Miles (ASMs) (bil) |
56.8 | 61.0 | ~61.8 | ~58.2 | ~237.8 | |||||||||||||||
| CASM ex fuel and special items (YOY % change)1 |
8.97 | 8.55 | +1% to +3 | % | +1% to +3 | % | +2% to +4 | % | ||||||||||||
| Cargo Revenues ($ mil) |
206 | 221 | ~210 | ~225 | ~862 | |||||||||||||||
| Other Revenues ($ mil) |
1,124 | 1,214 | ~1,155 | ~1,123 | ~4,616 | |||||||||||||||
| Average Fuel Price (incl. taxes & hedges) ($/gal) (as of 7/21/14) |
3.10 | 3.02 | ~2.93 to 2.98 | ~2.92 to 2.97 | 2.98 to 3.03 | |||||||||||||||
| Fuel Gallons Consumed (mil) |
874 | 937 | ~944 | ~882 | ~3,637 | |||||||||||||||
| Interest Income ($ mil) |
(7 | ) | (8 | ) | ~(8) | ~(7) | ~(30) | |||||||||||||
| Interest Expense ($ mil)2 |
212 | 212 | ~210 | ~221 | ~855 | |||||||||||||||
| Other Non-Operating (Income)/Expense ($ mil)2,3 |
(15 | ) | (11 | ) | ~5 | ~4 | ~(17) | |||||||||||||
| CAPEX Guidance ($ mil) Inflow/(Outflow) |
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| Non-Aircraft CAPEX |
(133 | ) | (128 | ) | ~(309) | ~(309) | ~(880) | |||||||||||||
| Net Aircraft CAPEX & PDPs |
(483 | ) | (1,007 | ) | ~(821) | ~1,074 | ~(1,237) | |||||||||||||
Notes:
| 1. | CASM ex fuel and special items is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
| 2. | Excludes special items; please see the GAAP to non-GAAP reconciliation at the end of this document. |
| 3. | Other Non-Operating (Income)/Expense includes primarily gains and losses from foreign currency. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Regional Update
July 24, 2014
Regional Comments
| • | AAG receives feed from 10 regional airlines, including wholly owned subsidiaries Envoy, PSA Airlines and Piedmont Airlines. |
| • | All operating expenses (including capacity purchase agreements) associated with regional operations are included within the regional non-fuel operating expense line item on the income statement. |
| 1Q14A | 2Q14A | 3Q14E | 4Q14E | FY14E | ||||||||||||||||
| Regional Guidance |
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| Available Seat Miles (ASMs) (bil) |
6.56 | 7.09 | ~7.33 | ~7.31 | ~28.29 | |||||||||||||||
| CASM ex fuel and special items (YOY % change)1 |
16.62 | 15.80 | +4% to +6 | % | 0% to +2 | % | +3% to +5 | % | ||||||||||||
| Average Fuel Price (incl. taxes & hedges) ($/gal) (as of 7/21/14) |
3.10 | 3.07 | 2.98 to 3.03 | 2.97 to 3.02 | 3.02 to 3.07 | |||||||||||||||
| Fuel Gallons Consumed (mil) |
161 | 174 | ~178 | ~175 | ~688 | |||||||||||||||
Regional Airlines
| Envoy2 |
Air Wisconsin Airlines Corporation | |
| SkyWest Airlines, Inc. |
Mesa Airlines, Inc. | |
| ExpressJet Airlines, Inc. |
Piedmont Airlines, Inc.2 | |
| Republic Airline Inc. |
PSA Airlines, Inc.2 | |
| Chautauqua Airlines, Inc. |
Trans States Airlines, Inc.3 |
Notes:
| 1. | CASM ex fuel expense and special items is a non-GAAP financial measure. Please see the GAAP to non-GAAP reconciliation at the end of this document. |
| 2. | Wholly owned subsidiary of American Airlines Group Inc. |
| 3. | Pro-rate agreement. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Fleet Update
July 24, 2014
Fleet Comments
| • | The Company expects to take delivery of 83 mainline aircraft during 2014, consisting of 10 A319s, 43 A321s, 3 A332s, 19 B738s, 2 B788s and 6 B773s. In addition, the company expects to retire 6 A320s, 14 B734s, 19 B757s, 14 B762s and 27 MD80s by the end of 2014 (all B734 aircraft are expected to exit the fleet by the end of Q3 2014). |
| • | In 2014, the Company expects to take delivery of 15 CRJ900 aircraft at its wholly owned subsidiary PSA Airlines. In addition, the Company’s partner airlines are expected to take delivery of 10 CRJ900 aircraft and 24 E175 aircraft. The Company expects to retire 40 ERJ140 aircraft and 2 Dash 8-100 aircraft. |
| • | In April 2014, the Company exercised its option to purchase (and thus terminated its existing lease financing arrangements for) 62 Airbus A320 family aircraft scheduled to be delivered between first quarter 2015 and third quarter 2017. In connection with this decision, the Company also exercised its right to convert firm orders for 30 Airbus A320 family NEO aircraft (scheduled to be delivered in 2021 and 2022) to options to acquire such aircraft. |
Notes:
| 1. | Fleet counts now include aircraft in temporary storage and aircraft that have yet to be returned to lessors. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Shares Outstanding
July 24, 2014
Shares Outstanding Comments
| • | The estimated weighted average shares outstanding for the remainder of the year are listed below. |
2014 Shares Outstanding (shares mil)1
| Shares | ||||||||
| For Q3 |
Basic | Diluted | ||||||
| Earnings |
726 | 741 | ||||||
| Net loss |
726 | 726 | ||||||
| Shares | ||||||||
| For Q4 |
Basic | Diluted | ||||||
| Earnings |
727 | 742 | ||||||
| Net loss |
727 | 727 | ||||||
| Shares | ||||||||
| For FY 2014 Average |
Basic | Diluted | ||||||
| Earnings |
728 | 742 | ||||||
| Net loss |
728 | 728 | ||||||
Notes:
| 1. | Shares outstanding are based upon several estimates and assumptions, including average per share stock price and stock award activity and do not take into consideration any activity under the $1 billion share repurchase program. The number of shares in actual calculations of earnings per share will likely be different from those set forth above. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
GAAP to Non-GAAP Reconciliation
July 24, 2014
The Company is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. The Company believes that the non-GAAP financial measures provide investors the ability to measure financial performance excluding special items, which is more indicative of the Company’s ongoing performance and is more comparable to measures reported by other major airlines. The Company believes that the presentation of mainline CASM excluding fuel and special items and regional CASM excluding fuel and special items is useful to investors because both the cost and availability of fuel are subject to many economic and political factors beyond the Company’s control.
American Airlines Group Inc GAAP to Non-GAAP Reconciliation
($ mil except ASM and CASM data)
| 1Q14 | 2Q14 | 3Q14 Range | 4Q14 Range | FY14 Range | ||||||||||||||||||||||||||||
| Actual | Actual | Low | High | Low | High | Low | High | |||||||||||||||||||||||||
| Mainline |
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| Mainline operating expenses1 |
$ | 7,671 | $ | 8,299 | $ | 7,940 | $ | 8,090 | $ | 7,613 | 7,757 | $ | 31,519 | $ | 32,013 | |||||||||||||||||
| Less mainline fuel |
2,711 | 2,830 | 2,766 | 2,813 | 2,575 | 2,620 | 10,882 | 10,974 | ||||||||||||||||||||||||
| Less special items |
(137 | ) | 251 | — | — | — | — | 114 | 114 | |||||||||||||||||||||||
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| Mainline operating expense excluding fuel and special items |
5,097 | 5,218 | 5,174 | 5,277 | 5,038 | 5,137 | 20,523 | 20,925 | ||||||||||||||||||||||||
| Mainline CASM (cts)1 |
13.50 | 13.61 | 12.85 | 13.09 | 13.08 | 13.33 | 13.25 | 13.46 | ||||||||||||||||||||||||
| Mainline CASM excluding fuel and special items (Non-GAAP) (cts) |
8.97 | 8.55 | 8.37 | 8.54 | 8.66 | 8.83 | 8.63 | 8.80 | ||||||||||||||||||||||||
| Mainline ASMs (bil) |
56.8 | 61.0 | 61.8 | 61.8 | 58.2 | 58.2 | 237.8 | 237.8 | ||||||||||||||||||||||||
| Regional |
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| Regional operating expenses |
$ | 1,594 | $ | 1,657 | $ | 1,672 | $ | 1,703 | $ | 1,669 | $ | 1,701 | $ | 6,573 | $ | 6,678 | ||||||||||||||||
| Less regional fuel expense |
500 | 535 | 530 | 539 | 520 | 529 | 2,085 | 2,103 | ||||||||||||||||||||||||
| Less special items |
4 | 2 | — | — | — | — | 6 | 6 | ||||||||||||||||||||||||
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| Regional operating expenses excluding fuel and special items |
1,090 | 1,120 | 1,142 | 1,164 | 1,149 | 1,172 | 4,482 | 4,569 | ||||||||||||||||||||||||
| Regional CASM (cts) |
24.30 | 23.37 | 22.82 | 23.24 | 22.83 | 23.26 | 23.23 | 23.60 | ||||||||||||||||||||||||
| Regional CASM excluding fuel and special items (Non-GAAP) (cts) |
16.62 | 15.80 | 15.58 | 15.88 | 15.72 | 16.03 | 15.84 | 16.15 | ||||||||||||||||||||||||
| Regional ASMs (bil) |
6.56 | 7.09 | 7.33 | 7.33 | 7.31 | 7.31 | 28.29 | 28.29 | ||||||||||||||||||||||||
| Interest Expense |
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| Interest Expense |
243 | 214 | 210 | 210 | 221 | 221 | 888 | 888 | ||||||||||||||||||||||||
| Less special items |
31 | 2 | — | — | — | — | 33 | 33 | ||||||||||||||||||||||||
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| Interest Expense excluding special items |
212 | 212 | 210 | 210 | 221 | 221 | 855 | 855 | ||||||||||||||||||||||||
| Other Non-Operating (Income)/Expense |
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| Other non-operating (income)/expense |
1 | (11 | ) | 5 | 5 | 4 | 4 | (1 | ) | (1 | ) | |||||||||||||||||||||
| Less special items |
16 | — | — | — | — | — | 16 | 16 | ||||||||||||||||||||||||
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| Other non-operating (income)/expense excluding special items |
(15 | ) | (11 | ) | 5 | 5 | 4 | 4 | (17 | ) | (17 | ) | ||||||||||||||||||||
Notes: Amounts may not recalculate due to rounding.
| (1) | Forecasted mainline operating expenses exclude special items. |
Please refer to the footnotes and the forward looking statements page of this document for additional information
Forward Looking Statements
July 24, 2014
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “if current trends continue,” “optimistic,” “forecast” and other similar words. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, estimates, expectations and intentions, and other statements that are not historical facts. These forward-looking statements are based on the current objectives, beliefs and expectations of the Company, and they are subject to significant risks and uncertainties that may cause actual results and financial position and timing of certain events to differ materially from the information in the forward-looking statements. The following factors, among others, could cause actual results and financial position and timing of certain events to differ materially from those described in the forward-looking statements: significant operating losses in the future; downturns in economic conditions that adversely affect the Company’s business; the impact of continued periods of high volatility in fuel costs, increased fuel prices and significant disruptions in the supply of aircraft fuel; competitive practices in the industry, including the impact of low cost carriers, airline alliances and industry consolidation; the challenges and costs of integrating operations and realizing anticipated synergies and other benefits of the merger transaction with US Airways Group, Inc.; the Company’s substantial indebtedness and other obligations and the effect they could have on the Company’s business and liquidity; an inability to obtain sufficient financing or other capital to operate successfully and in accordance with the Company’s current business plan; increased costs of financing, a reduction in the availability of financing and fluctuations in interest rates; the effect the Company’s high level of fixed obligations may have on its ability to fund general corporate requirements, obtain additional financing and respond to competitive developments and adverse economic and industry conditions; the Company’s significant pension and other post-employment benefit funding obligations; the impact of any failure to comply with the covenants contained in financing arrangements; provisions in credit card processing and other commercial agreements that may materially reduce the Company’s liquidity; the limitations of the Company’s historical consolidated financial information, which is not directly comparable to its financial information for prior or future periods; the impact of union disputes, employee strikes and other labor-related disruptions; any inability to maintain labor costs at competitive levels; interruptions or disruptions in service at one or more of the Company’s hub airports; any inability to obtain and maintain adequate facilities, infrastructure and slots to operate the Company’s flight schedule and expand or change its route network; the Company’s reliance on third-party regional operators or third-party service providers that have the ability to affect the Company’s revenue and the public’s perception about its services; any inability to effectively manage the costs, rights and functionality of third-party distribution channels on which the Company relies; extensive government regulation, which may result in increases in the Company’s costs, disruptions to the Company’s operations, limits on the Company’s operating flexibility, reductions in the demand for air travel, and competitive disadvantages; the impact of the heavy taxation to which the airline industry is subject; changes to the Company’s business model that may not successfully increase revenues and may cause operational difficulties or decreased demand; the loss of key personnel or inability to attract and retain additional qualified personnel; the impact of conflicts overseas, terrorist attacks and ongoing security concerns; the global scope of the Company’s business and any associated economic and political instability or adverse effects of events, circumstances or government actions beyond its control, including the impact of foreign currency exchange rate fluctuations and limitations on the repatriation of cash held in foreign countries; the impact of environmental regulation; the Company’s reliance on technology and automated systems and the impact of any failure of these technologies or systems; challenges in integrating the Company’s computer, communications and other technology systems; costs of ongoing data security compliance requirements and the impact of any significant data security breach; losses and adverse publicity stemming from any accident involving any of the Company’s aircraft or the aircraft of its regional or codeshare operators; delays in scheduled aircraft deliveries, or other loss of anticipated fleet capacity, and failure of new aircraft to perform as expected; the Company’s dependence on a limited number of suppliers for aircraft, aircraft engines and parts; the impact of changing economic and other conditions beyond the Company’s control, including global events that affect travel behavior such as an outbreak of a contagious disease, and volatility and fluctuations in the Company’s results of operations due to seasonality; the effect of a higher than normal number of pilot retirements and a potential shortage of pilots; the impact of possible future increases in insurance costs or reductions in available insurance coverage; the effect of several lawsuits that were filed in connection with the merger transaction with US Airways Group, Inc. and remain pending; an inability to use NOL carryforwards; any impairment in the amount of goodwill the Company recorded as a result of the application of the acquisition method of accounting and an inability to realize the full value of the Company’s and American Airlines’ respective intangible or long-lived assets and any material impairment charges that would be recorded as a result; price volatility of the Company’s common stock; delay or prevention of stockholders’ ability to change the composition of the Company’s board of directors and the effect this may have on takeover attempts that some of the Company’s stockholders might consider beneficial; the effect of provisions of the Company’s Certificate of Incorporation and Bylaws that limit ownership and voting of its equity interests, including its common stock, its preferred stock and convertible notes; the effect of limitations in the Company’s Certificate of Incorporation on acquisitions and dispositions of its common stock designed to protect its NOL carryforwards and certain other tax attributes, which may limit the liquidity of its common stock; and other economic, business, competitive, and/or regulatory factors affecting the Company’s business, including those set forth in the Company’s quarterly report on form 10-Q for the period ended June 30, 2014 (especially in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections) and other risks and uncertainties listed from time to time in our filings with the SEC. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements. The Company does not assume any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions or changes in other factors affecting these forward-looking statements except as required by law.
Please refer to the footnotes and the forward looking statements page of this document for additional information