American Airlines CEO: We knocked it out of the park


American Airlines


American Airlines announced Friday that the company increased annual profits, surging 50% from $4.2 billion in 2014 to $6.3 billion last year.


In the fourth quarter, the airline reported $1.3 billion in profits at $2.00 per diluted share- beating average analysts expectations of $1.96.

"We knocked it out of the park," American Airlines chairman and CEO Doug Parker said on the company's investors call.

Parker commended his company for having such a successful year while working through the complex integration of American Airlines and US Airways.

Much of the American's increased profitability can be attributed to 41% reduction in fuel costs, which translated into a savings of nearly $4.4 billion.


However, the airline also reported a 3.9% drop in total revenue to $41 billion for the year.

American blamed the decline to a strong US dollar, increased capacity competition in markets such as its home base in Dallas, and a drop in international fuel surcharges.

The airline is also experiencing softness in traditionally strong markets in China and Japan.

Furthermore, Brazil's sluggish economy has affected American's operations. In matter on months, Brazil's share of the company's revenue dropped from 6.1% to just 2%.

In general, lower revenue can also be attributed lower fuel prices which leads to lower tickets prices. However, American maintains record profitability and margins of 12 to 14%.


Analysts on the investors call questioned American's decision to finance its new aircraft purchases even though it holds $6.9 billion in cash and short-term investments. The airline is expected to take delivery of more than 100 new aircraft this year.

"We've paid off our high interest rate debt and with the ability to get financing at less than 4%, it doesn't make sense for us and our investors to pay cash," a company executive said.

"Also, due to the financing of the aircraft, we need to hold higher levels of collateral."

In terms of the effect the Zika virus is having on the American and its significant Latin and South American operations, the airline said that it has procedures in place to keep their aircraft clean and its crews safe while abroad. Further, it has not seem much in terms of refunds due to the outbreak.

Shares of American Airlines are down slightly in morning trading.


NOW WATCH: US pilots reliance on autopilot 'a growing concern'