American Airlines is logging record profits and rewarding shareholders just one year removed from bankruptcy court and a big merger.
The airline is getting a huge lift from cheaper fuel -- savings could top $5 billion this year -- and travel demand that shows no sign of weakening. CEO Doug Parker says 2015 is shaping up as another strong year.
But American's shares fell 3 percent early amid a broader market sell-off and after the company said that a key revenue figure would decline in the first quarter. American said revenue for each seat flown one mile would be 2 percent to 4 percent lower than a year ago partly because competition is leading to lower fares on about 50 routes.
American Airlines Group Inc. said Tuesday that fourth-quarter net income was $597 million, reversing a $2 billion loss a year earlier.
Excluding one-time costs such as expenses to combine American and US Airways, the company earned a record $1.1 billion, or $1.52 per share. That was a penny better than expected by analysts, according to Zacks Investment Research.
Airlines are getting a windfall from lower fuel prices and because travel demand is so great, ticket prices are not falling. American will benefit particularly because it doesn't hedge against higher fuel prices. That means it takes some risk in case oil prices spike, but it captures more of the bonanza when oil prices fall, as they did in late 2014.
American and US Airways cut their fuel bill by 17.6 percent, and regional affiliates also saved at the pump. That more than offset a 4.2 percent increase in labor costs.
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Lower fuel prices could save the company more than $5 billion in 2015, chief financial officer Derek Kerr said in a call with analysts Tuesday.
Shareholders are getting the payoff. In the second half of 2014, American spent $1 billion buying back its own stock, which makes remaining shares more valuable. The company announced Tuesday that it plans to buy back another $2 billion in stock and pay another quarterly dividend; 10 cents per share.
American seems able to afford those payouts -- excluding one-time items, it earned a record $4.2 billion in 2014.
Parker called it a "fantastic first year for our merger." The results, plus the economic outlook, "give us confidence that 2015 will be another outstanding year for American Airlines," he said in a printed statement.
The year-ago fourth-quarter loss was weighed down by $2.4 billion in items related to American's 2-year bankruptcy case and the merger.
Fourth-quarter revenue was $10.16 billion, up 2.1 percent and slightly higher than Wall Street's forecast of $10.14 billion, according to Zacks.
The shares fell $1.78 to $53.67 as the Dow Jones industrial average tumbled 350 points on some adverse U.S. economic reports.
American's shares began the day up about 3 percent since the beginning of the year and 82 percent in the past 12 months.
