American Airlines Earnings Limited by Added Capacity

American Airlines Group Inc. (NASDAQ: AAL) reported fourth-quarter and full-year 2015 earnings before markets opened Friday. For the quarter, the airline posted adjusted diluted earnings per share (EPS) of $2.00 on revenues of $9.63 billion. In the same period a year ago, the company reported EPS of $1.52 on revenues of $10.16 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.97 and $9.63 billion in revenues.

Fourth-quarter net profit excludes a $3 billion net special credit for a reversal of American’s tax valuation allowance. Including the credit, GAAP net profit for the quarter totaled $5.09 per share.

For the full year, American reported a non-GAAP EPS of $9.12 and revenues of $40.99 billion, compared with 2014 EPS of $3.93 and revenues of $42.65 billion. Analysts were looking for EPS of $9.09 and revenues of $41 billion.

In the fourth quarter, the company returned $1.2 billion to shareholders through the payment of $72 million in quarterly dividends and the repurchase of $1.1 billion of common stock (25.6 million shares). When combined with the dividends and shares repurchased during the first three quarters of 2015, American returned $3.9 billion to its shareholders in 2015 and reduced its shares outstanding by repurchasing 85.1 million shares for $3.6 billion.

CEO Doug Parker said:

American Airlines enters 2016 well-positioned for the future. With the youngest aircraft fleet among our major competitors, more than $2 billion of product investments underway, and the best aviation professionals in the business, we are well on our way to restoring American as the greatest airline in the world.

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Revenue fell 5.2% year over year in the quarter on a 0.6% increase in available seat miles. Consolidated passenger revenue per available seat mile was 12.69 cents, down 6% from the fourth quarter 2014. Fourth-quarter consolidated passenger yield was 15.34 cents, down 8.9% compared with the prior year.

American added nearly 3% to its available capacity in the third quarter of 2015 and another 0.6% in the fourth quarter. Pretty soon the airline needs to begin filling those seats.

American’s shares closed at $38.14 on Thursday, in a 52-week range of $34.10 to $56.05. The stock traded up nearly 2% in Friday’s premarket at $38.86. The consensus price target from Thomson Reuters was $54.54 before the earnings announcement.