American Airlines Profit Drops 91%

American Airlines Profit Drops 91% Last Quarter

American Airlines saw a 91% drop in its profit last quarter, in comparison to its profit a year earlier.

American Airlines released in its 2016 and reported that the airline net income stood at $289 million in the fourth quarter, which ended December 31, 2016.  That’s in comparison to $3.28 billion net income the airline saw at the end of the fourth quarter a year earlier, which ended December 31, 2015.  Much of this change can be attributed to the fact that the airline received a $3 billion tax benefit last year that it did not receive this year.

Chairman and CEO Doug Parker said in a statement,

“The American Airlines team continued to produce outstanding results in 2016, and outsiders are taking notice. Air Transport World named American as its 2017 Airline of the Year, citing our team’s integration work, operational and customer service improvements, and the significant investments we are making in our product. This recognition is entirely due to the great work of our 120,000 team members.”

Here’s some more breakdown on the fourth quarter/year-end results for the airline:

• Fourth quarter 2016 pre-tax profit of $500 million, or $773 million excluding net special charges, and net profit of $289 million, or $475 million excluding net special charges
• Full year 2016 pre-tax profit of $4.3 billion, or $5.1 billion excluding net special charges, and net profit of $2.7 billion, or $3.2 billion excluding net special charges
• Fourth quarter Total Revenue per Available Seat Mile (TRASM) was up 1.3 percent year-over-year, marking the first year-over-year increase since the fourth quarter 2014
• The Company accrued approximately $57 million in the fourth quarter for its profit sharing plan, bringing the total accrual to $314 million for 2016
• Returned $606 million to stockholders through share repurchases and dividends in the fourth quarter, for a total of $4.6 billion in 2016. Announced a new $2.0 billion share repurchase authorization

What does this mean for American Airlines?

So what does this mean?  Well, the airline saw an increase in labor costs and fuel prices, and the loss of a significant tax benefit certainly had its impact.  However, at large for the year, the airline fared better than it did in 2015, so though the fourth quarter looks rough, that can be attributed to the reasons listed above.  It’s important to note that last quarter, labor costs increased over 17.4% and fuel prices increased 18.6%.  Both Delta and United listed similar increases in their fourth quarter reporting.