Airlines Earnings Report: Lower Jet-Fuel Prices Push AAL, UAL To Post Record Profit In 1Q 2015

American Airlines (AAL) and United Airlines (UAL), two major American commercial airliners, have announced record profit earnings for the first quarter of 2015, spurred by lower jet fuel prices.

The Fort Worth, Texas-based company AAL reported on Friday net income hit $932 million in the first quarter, equivalent to $1.30 per share. The record figures were almost doubled the $480 million posted a year ago. Disregarding special items amounting to $311 million, the airline firm likewise had a record first quarter profit of $1.2 billion, or $1.73 per share, which is three times the profit earned when 2014 started. Analysts polled by Thomson Reuters had expected only a growth equivalent to $1.71 per share.

While revenue fell to $9.8 billion or 1.7 percent, it wasn’t considered bad since operating costs eventually dropped to 7.1 percent to $8.6 billion in the quarter, triggered a reduction in its fuel bill by 43 percent.

With the upbeat performance, AAL's board declared a quarterly dividend of $0.10 per share. "We are pleased to report record first quarter profits, exceeding the prior record set just last year," Doug Parker, American Airlines Group Chairman and CEO, said, noting the strong financial performance helped the airline get off to a great start for 2015. In the first quarter of 2015, salaries, wages and benefits grew 12 percent, to $2.37 billion from $2.12 billion in first quarter of 2014.

UAL likewise posted positive developments in the same first quarter of 2015. Excluding special items, the Chicago-based airline raked in $582 million, or $1.52 per diluted share. Analysts from Thomson Reuters I/B/E/S had forecast a $1.44 per diluted share. The figure represented a $1 billion improvement over the first three months of 2014, which Jeff Smisek, UAL's president and CEO, said was “the highest first quarter profit in United's history.” UAL earned a total of $508 million last quarter. Revenue, however, fell, albeit by only a marginal one percent to $8.61 billion.

Both airlines, however, forecast figures to be different in the second quarter, notably going down. UAL estimates revenue to drop 4 to 6 percent in the current quarter, the same numbers AAL predicts for its own. The drop will be due to a lot of reasons, among them foreign currency pressure. While lower oil prices will make airlines rich, it will impact the travel programs of its corporate clients thus affecting the airlines in some way.

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