The $1 billion net profit recorded by its parent, AMR Corp, makes American Airlines the most profitable carrier in 1996. This figure is inflated by the inevitable below-the-line items, but the $497 million after-tax gain on the Sabre initial public offering was dented by the $230 million write-down of AMR's Canadian Airlines shareholding and an $89 million loss from early debt retirement. However, AMR beat the high fuel prices to achieve a record operating profit of $1.8 billion.
Most US majors performed well in 1996, aided by the strong US economy and the abolition of fuel taxes for most of the year. Six others - United, Northwest, Federal Express, Continental, US Airways and Southwest - join American in the table of the top 20 net earners, and United and Northwest also achieved $1 billion-plus operating profits. However, TWA remained heavily in the red, and Delta's result was depressed by $829 million in restructuring costs.
British Airways retained its profits lead over Singapore Airlines, with a $198 million restructuring charge neatly wiped out by a $195 million gain from reversing the write-down of BA's US Airways stake - which it has since sold. SIA's operating profit fell 14 per cent to $635 million as it suffered from heavy competition and unfavourable exchange rates, but a $113 million surplus from aircraft sales pushed the net profit up. Similarly, Cathay Pacific boosted its operating performance only marginally but gained $70 million from reducing its shareholding in Dragonair.
The two Mexican majors achieved the best turnarounds in financial performance. As the Mexican economy recovered from the peso crisis, and as restructuring took effect, both carriers leapt from losses to net profit margins which are the envy of the industry - 32.8 per cent for Aeromexico and 18.9 per cent for Mexicana. However, while both recorded strong operating profits, their complex financial restructuring benefited their bottom lines as well. Middle East Airlines also recorded a very high net margin of 28.6 per cent, but this was boosted by a recapitalisation. Once again, Atlantic Southeast and SIA earned strong net margins.
About a quarter of the Airline Business 100 carriers lost money again last year. Alitalia's monster loss of $780 million arose from a 54 per cent drop in operating profit combined with $584 million in restructuring charges. Swissair's parent, SAirGroup, boosted operating profits by 40 per cent but made a $243 million restructuring charge and wrote down its Sabena stake by $216 million. Sabena itself suffered from strikes and money-losing fleet disposals.
TWA was hit by overexpansion and the TWA 800 disaster, plus an $86 million charge for disposing of old aircraft. Korean Air and Japan Airlines suffered from fuel price increases and weak currencies - Korean Air recorded a $109 million currency loss. Air France returned to profit, but its domestic operation, Air France Europe, continued to lose money heavily.
Source: Airline Business
