 November 6, 2014
Raymond James
2014 Global Airline &
Transportation Conference
Derek Kerr
Chief Financial Officer
American Airlines Group Inc.
Exhibit 99.1 |
 2
Cautionary Statement Regarding Forward-Looking
Statements and Information
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;
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
ending
September
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
the
Company’s
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. |
 3
Introduction
Source: Company reports.
* Excludes net special items. Please refer to the GAAP to non-GAAP
reconciliation at the end of this document. •
A record breaking quarter:
-
Record 3Q profit* of $1.2 billion
-
All-time record GAAP net profit of $942 million
-
Record 3Q revenues: $11.1 billion
-
Record 3Q PRASM: 14.12 cents
-
Record 3Q Yield: 16.93 cents
•
After a difficult summer, operational performance is
starting to show improvements
•
Returned $185 million to shareholders in the third
quarter by buying back shares and paying a $0.10
per share dividend
•
While still early, integration has gone smoothly and
teams continue to work well together combining the
two networks
•
Anticipate record 4Q and FY 2014 earnings |
 3Q
Consolidated Passenger RASM 4
•
Despite higher ASM growth and pressure in Latin America, American’s
PRASM growth remains positive
Source: Company reports |
 3Q
Mainline CASM Performance 5
•
Despite the impact of higher labor expenses, third quarter mainline CASM
excluding fuel and special items was only up 0.7% YOY
Source: Company reports. Excludes net special items. Please refer to the GAAP
to Non-GAAP reconciliation at the end of this document |
 3Q
Pretax Margin 6
•
American’s pretax margin is already in line with peers
Source: Company reports. Excludes net special items. Please refer to the GAAP
to Non-GAAP reconciliation at the end of this document 21.8%
14.6%
12.7%
11.0%
10.2%
8.6%
3Q14 Pretax Margin
(ex special items)
5.7 pts
4.4 pts
4.1 pts
3.1 pts
2.6 pts
0.4 pts
3Q14 YOY Pretax Margin Improvement
(ex special items)
17.6%
11.5%
11.4%
9.5%
5.5%
5.0%
3Q14 YTD Pretax Margin
(ex special items) |
 Total Relative Liquidity Position
American had $9.8B in available liquidity, or 23% of LTM Revenues at
the end of the third quarter
Source: Company reports.
1. Data
includes total on balance sheet cash as of September 30, 2014 plus available undrawn revolver capacity at that date. In October 2014,
AAL increased its undrawn revolving credit capacity by $800 million, bringing the total undrawn
revolving credit facility to $1.8 billion |
 Integration Update –
Early Results Encouraging
•
US Airways launched a codeshare with BA, IB, Air
Berlin and Finnair, fully integrating it into the Trans-
Atlantic Joint Business Agreement
•
Announced a combined frequent flyer program for 2015
•
Reached a tentative agreement with the Association of
Professional Flight Attendants on a joint collective
bargaining agreement
•
Recalibrated Miami schedule to increase the number of
available connections and optimize revenue
•
Combined operations at 82 airports, including ORD
•
Broke ground on the state of the art Robert W. Baker
Integrated Operations Center
•
Aligned award travel options, checked baggage policies
and inflight services for First and Business Class
customers
•
Made significant progress towards a Single Operating
Certificate (SOC) |
 Investments in Our Product
9
•
Improved check-in areas
•
Narrowbody standardization
•
Widebody aircraft retrofits
•
A321 Transcontinental
-
New fully lie-flat, all-aisle access
Business Class seat
-
International Wi-Fi
-
AC power outlets and USB power
-
Walk-up bar
-
Enhanced in-seat entertainment
-
Main Cabin Extra seating
-
Fully lie-flat seats in First and Business
-
All-aisle access in First Class
-
Main Cabin Extra seating
-
AC power outlets and USB power
-
Personal in-seat entertainment |
 Fleet Replacement Plan
10
•
American will have one of the most modern and fuel efficient fleets in
the industry
Combined AAG order book as of September 30, 2014
2014
2015
2016
2017
2018
Beyond 2018
Total
A320 Family
53
42
25
20
-
-
140
A320 Family Neo
-
-
-
10
25
65
100
A330-200
3
-
-
-
-
-
3
A350-900
-
-
-
6
10
6
22
B737-800
20
18
20
20
-
-
78
B737-8 Max
-
-
-
3
17
80
100
B777-300ER
6
2
2
-
-
-
10
B787 Family
2
11
13
9
7
-
42
Mainline Total
84
73
60
68
59
151
495
Average Mainline Age (yrs)
12.3
11.1
10.3
9.9
10.1
CRJ-900
15
15
-
-
-
-
30
E175
-
24
24
12
-
-
60
Regional Total
15
39
24
12
-
-
90 |
   Retrofit Plan
11
•
We are retrofitting our aircraft to add seats and bring them in line with
industry standards
Here are the facts on our planned retrofits
Aircraft Type
Current Configuration
Retrofit Configuration
Number of Aircraft
Expected Completion
Boeing
150
160
252
Phase 1: 4Q14
737-800
Seats
Seats
Aircraft
Phase 2: 4Q15
Boeing
247
289
47
2Q
777-200
Seats
Seats
Aircraft
2016
Boeing
218
209
25
2Q
767-300
Seats
Seats
*
Aircraft
2015
*
The seat count on the B767-300 actually decreases because of the installation of fully
lie-flat seats. How do we stack up to competitors with our retrofit projects?
Aircraft
Type
Boeing
160
160
Up to
166
175
737-800
Seats
Seats
Seats
Seats
Boeing
777-200
International
*
United 777-200 aircraft is configured with 348 seats in select markets
Up to
269
Seats*
N/A
289
Seats
291
Seats |
 Financing Transactions
12
•
The Company has taken
advantage of attractive
opportunities in the credit markets
•
At the same time, the Company
has paid down higher cost debt
•
And reduced its average cost of
capital |
 |
 4Q
Outlook 14
•
PRASM
-
4Q PRASM expected to be approximately flat to up 2 percent
-
Excluding impact from Venezuela, 4Q PRASM up approximately 2 percent to 4
percent •
CASM Excluding Fuel & Special Items
-
Mainline: +2 percent to +4 percent
-
Regional: flat to +2 percent
•
Fuel Price
-
Mainline: $2.56/gal to $2.61/gal
-
Regional: $2.60/gal to $2.65/gal
•
Pretax Margin Excluding Special Items
-
Approximately 10 percent to 12 percent
4Q Guidance Remains Unchanged from October 23 Earnings Call
|
 15
American Long Term Vision
Restore American to The Greatest Airline in the World
Restore
•
Means we’ve been there before –
tremendous asset
•
And it means that we know we’re not there yet –
much work ahead
Greatest
•
Hard to define, but certainly:
-
Airline customers want to fly
-
Airline where employees want to work
-
Airline where people want to invest
Airline
•
Singular focus on running a great airline
•
Noble profession
World
•
Global business |
 Five Imperatives
Engage our team members.
Ensure they have the tools and information they need to do the
jobs they perform so well. Create an environment of coordinated,
collaborative teamwork and mutual respect.
Provide a return for our investors.
As the largest airline in the world, we should be the most
profitable. If not, investments will go to other airlines over ours
and that is not a formula for success.
Look to the future.
Our industry is continuing to evolve and we need to ensure we
are leading the change, not chasing it.
16
Focus on our customers’
needs and wants.
Provide a network and a product that is as good or better than our
competitors.
Be an industry leader.
Safe and
reliable
airline
operations
-
It
must
be
part
of
the fiber
of our company. |
 17
Conclusion
Source: Company reports.
* Excludes net special items. Please refer to the GAAP to non-GAAP
reconciliation at the end of this document. •
A record breaking quarter:
•
After a difficult summer, operational performance is
starting to show improvements
•
Returned $185 million to shareholders in the third
quarter by buying back shares and paying a $0.10
per share dividend
•
While still early, integration has gone smoothly and
teams continue to work well together combining the
two networks
•
Anticipate record 4Q and FY 2014 earnings
-
Record 3Q profit* of $1.2 billion
-
All-time record GAAP net profit of $942 million
-
Record 3Q revenues: $11.1 billion
-
Record 3Q PRASM: 14.12 cents
-
Record 3Q Yield: 16.93 cents |
 |
 GAAP to non-GAAP Reconciliation
19
American Airlines Group Inc. Combined
%
Change
2014
2013
2014
2013
Reconciliation of Income Before Income Taxes Excluding
Special Items
Income before income taxes as reported
949
$
625
$
2,645
$
879
$
Special items:
Special items, net
221
55
335
201
Regional operating special items, net
2
(14)
7
(9)
Nonoperating special items, net
50
80
101
197
Reorganization items, net
-
151
-
435
Income before income taxes as adjusted for special items
1,222
$
897
$
36%
3,088
$
1,703
$
Calculation of Pre-Tax Margin Excluding
Special Items 2014
2013
2014
2013
Income before income taxes as adjusted for special items
$
1,222
$
897
$
3,088
$
1,703 Total operating revenues
$
11,139
$
10,668
$
32,490
$
30,435 Pre-tax margin excluding special items
11.0%
8.4%
9.5%
5.6%
%
Change
Reconciliation of Net Income Excluding Special Items
2014
2013
2014
2013
Net income as reported
942
$
505
$
2,285
$
714
$
Special items:
Special items, net
221
55
335
201
Regional operating special items, net
2
(14)
7
(9)
Nonoperating special items, net
50
80
101
197
Reorganization items, net
-
151
-
435
Non-cash income tax provision
8
-
352
-
Net tax effect of special items
-
(6)
-
(25)
Net income as adjusted for special items
1,223
$
771
$
59%
3,080
$
1,513
$
3 Months Ended
September 30,
9 Months Ended
September 30,
(In millions)
(In millions)
3 Months Ended
September 30,
9 Months Ended
September 30,
3 Months Ended
September 30,
9 Months Ended
September 30, |
 GAAP to non-GAAP Reconciliation
20
%
Change
%
Change
Reconciliation of Operating Cost per ASM Excluding Special
2014
2013
2014
2013
Items and Fuel -
Mainline only
Total operating expenses
9,879
$
9,540
$
29,101
$
28,144
$
Less regional expenses:
Fuel
(538)
(535)
(1,573)
(1,591)
Other
(1,130)
(1,064)
(3,346)
(3,210)
Total mainline operating expenses
8,211
7,941
24,182
23,343
Special items, net
(221)
(55)
(335)
(201)
Mainline operating expenses, excluding special items
7,990
7,886
23,847
23,142
Aircraft fuel and related taxes
(2,829)
(2,865)
(8,370)
(8,412)
Mainline operating expenses, excluding special items and fuel
5,161
5,021
15,477
14,730
(In cents)
Mainline operating expenses per ASM
13.28
$
13.11
$
13.46
$
13.35
$
Special items, net per ASM
(0.36)
(0.09)
(0.19)
(0.11)
Mainline operating expenses per ASM, excluding special items
12.92
13.02
13.27
13.23
Aircraft fuel and related taxes per ASM
(4.57)
(4.73)
(4.66)
(4.81)
Mainline operating expenses per ASM, excluding special items
and fuel
8.35
$
8.29
$
0.7%
8.61
$
8.42
$
2.3%
Note: Amounts may not recalculate due to rounding.
(In millions)
3 Months Ended
September 30,
9 Months Ended
September 30,
(In millions) |
 Questions? |