AMR reports net income of $135 million in July

[FA Mikey]

AMR, parent of American Airlines, reported net income of $135 million in July, showing a profit despite $54 million in expenses related to its bankruptcy reorganization.

http://aviationblog.dallasnews.com/2012/08/amr-reports-net-income-of-135-million-in-july-second-profitable-month-in-a-row.html/

 

[FWAAA]

Cue the assertions that no concessions were necessary.

Of course, it's easy to make net profits in July - the labor cost savings will help ensure that there's net profits for the full year even after the slow winter season takes its toll on the finances.

No doubt someone will multiply $135 million by 12 and ignorantly claim that AA is on target to earn $1.6 billion this year without any concessions.

Cash and short term investments of $4.8 billion, down a little. As I've posted numerous times, AA's cash balance grew in the first half of the year as vacationers bought advance purchase tickets for summer travel. Now, as AA has to deliver the flights to those advance purchasing customers, the cash balance slips a little as fewer people are buying advance purchase fares.

 

[737823]

Cue the assertions that no concessions were necessary.

Of course, it's easy to make net profits in July - the labor cost savings will help ensure that there's net profits for the full year even after the slow winter season takes its toll on the finances.

No doubt someone will multiply $135 million by 12 and ignorantly claim that AA is on target to earn $1.6 million this year without any concessions.

Cash and short term investments of $4.8 billion, down a little. As I've posted numerous times, AA's cash balance grew in the first half of the year as vacationers bought advance purchase tickets for summer travel. Now, as AA has to deliver the flights to those advance purchasing customers, the cash balance slips a little as fewer people are buying advance purchase fares.

Not to mention all the people who will affirm AA was cooking the books since they "made money" but their cash balance declined slightly because they are experts in financial accounting...

Josh

 

[FWAAA]

One surprising item was the catering expense for July of $50 million. For the first six months of 2012, that expense has averaged $42.5 million per month and the highest monthly amount was $45 million in May (and the expense declined in June to $43 million).

Granted, July was hotter and experienced higher load factors, and thus, more ice was probably purchased. But not $7 million more than in June.

Some possibilities:

AA suddenly improved the catering quality/quantity (doubtful);

Inventory shrinkage (employee theft/waste) suddenly exploded (doubtful);

Economy passengers bought several million more in Buy on Board food (doubtful); or

Catering companies raised prices significantly on July 1 (more likely).

Anybody have any ideas?

 

[BoeingBoy]

Anybody have any ideas?

It undoubtedly partially due to the different number of days in the months - at 1-1/3 to 1-12 million per day the extra day in July isn't peanuts. Then there's Feb, where the 2 fewer days skews your average for the 1st 6 months compared to July.

I don't keep up with the ebb and flow of seasonal flying AA does, especially longer haul/trans-Atlantic/Pacific but that could be a factor.

Lastly, didn't AA put some 777's on transcon flights this year? More capacity could equal more business/first and thus more meals.

Jim

 

[FWAAA]

It undoubtedly partially due to the different number of days in the months - at 1-1/3 to 1-12 million per day the extra day in July isn't peanuts. Then there's Feb, where the 2 fewer days skews your average for the 1st 6 months compared to July.

I don't keep up with the ebb and flow of seasonal flying AA does, especially longer haul/trans-Atlantic/Pacific but that could be a factor.

Lastly, didn't AA put some 777's on transcon flights this year? More capacity could equal more business/first and thus more meals.

Jim

Those are some possibilities, but the other 31 day months have still been at least $5 million less (range $5 to $8 million less) than July and February, 29 days this year, did come in at a very low $40 million. February's revenue was a correspondingly low number as well (owing to the shorter month). Here's the month by month catering expense (in millions of dollars):

Jan.....42
Feb.....40
Mar.....43
Apr.....42
May.....45
Jun.....43
Jul.....50

AA added one additional daily 777 between MIA and LAX this summer, but that wouldn't skew the numbers by these amounts. The increase for July is huge.

Could be that seasonal international routes account for some of the difference - I haven't compared ASMs on a seasonal basis to see if there is a big spike in the summer compared to other months. With AA's extensive flying to S America, I've assumed (perhaps mistakenly) that AA's long-haul flying is more level.

It's also possible that it's an error, as these monthly operating reports aren't audited. We might see August at an offsetting $38 or $40 if July's number was a mistake.

 

[700UW]

It could be money owed pre-petition or a new contract signed causing increases.

 

[eolesen]

Maybe the Board of Directors ordered a few too many Seafood Towers at Flemings....

 

[AirLUVer]

Could also be during hotter months more cokes are being handed out, fuller planes during July will also contribute to more consumed.

 

[eolesen]

A couple thoughts now that I've had time to have a few flash-backs from my cabin service ordering days.....

1) We haven't had visibility into the month-by-month spending before, so it's also possible that it is volume driven, but we could just as easily see an offset in August and September...

2) Invoices may be coming in asynchronous with consumption... While perishables are ordered and delivered on a JIT basis, nobody cares if the cups you're putting on the airplane were delivered three days or three months ago (assuming you have warehouse space...).

3) Rotables are usually an expense item, and they'll need to have several shipsets of carts, inserts, etc. onhand for the new 773 deliveries which start showing up next quarter. Hopefully they're the same as the 772, but you still need more of them.