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American Has $10.3 Billion In Cash That Could Speed Merger Integration

Jan 16, 2014 10:42 am

Skift Take

American has $10.3 billion in cash, some of which can be used to speed its integration with US Airways. Too bad United doesn’t have some more cash hanging around.

— Dennis Schaal

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The new American Airlines Group Inc. is holding on to about $10.3 billion in cash and investments, the company disclosed in an investor letter Monday.

The cash position capped two years of financial wrangling and contract negotiations to set the stage for the merger of American Airlines and US Airways in late 2013.

J.P. Morgan analysts Jamie Baker and Matt Streeter wrote Wednesday that the cash reserves could accelerate efforts to combine the two airlines’ actual operations.

“And while integration risks are not to be taken lightly, we remain optimistic that the integration of AA and US will proceed at a more rapid, less disruptive pace than the UA-CO (United-Continental) comparable,” they wrote in the investor letter.

American Airlines also announced that it had issued about 746 million shares of common stock, giving AAL a market cap of just more than $21.5 billion.

The combined airline didn’t provide its full financial information for the year. That should be reported in the next few weeks, although American is on track to record an annual profit for the first time since 2007. The airline earned $168 million in the first three quarters of 2013.

American Airlines had $7.7 billion on hand at the end of the third quarter, and US Airways reported cash and investments totaling $3.9 billion.

Through the merger process, American essentially transformed millions of dollars worth of debt into shareholder equity, held on to its cash reserves and spent billions on new planes.

Wednesday’s report showed that American took delivery of 20 new Airbus planes in 2013 and 39 new Boeing jets. It retired 45 aircraft, 28 of which were MD-80 jets. American Airlines now has 622 jets, a fleet that is significantly newer and nicer for travelers than a year ago.

US Airways took delivery of 21 new Airbus planes last year and retired 20 jets.

American also said it is dropping 17 nonstop routes at Reagan National Airport in metro Washington, D.C., and three routes out of LaGuardia Airport in New York. Those moves are the result of a settlement with the Justice Department that required the airline to give up landing and takeoff slots to merge with US Airways.

American is cutting routes from Washington to Augusta, Ga.; Detroit; Fayettville, N.C.; Fort Walton Beach, Fla.; Islip, N.Y.; Jacksonville, N.C.; Little Rock, Ark.; Minneapolis; Montreal; Myrtle Beach, S.C.; Nassau, Bahamas; and Omaha, Neb.

The communities that saw cuts will still have access to Reagan on American through a connecting hub.

Tulsa didn’t see any cuts because American doesn’t fly directly between Tulsa and Washington or New York.

United Airlines offers direct flights between Tulsa International Airport and metro Washington (Dulles airport) and New York (Newark airport).

American’s slots in Washington are still up for bid, and the winners are expected to be announced soon.

American sold its 17 slot pairs at LaGuardia to Southwest Airlines and Jet Blue.

American also said Wednesday it was cutting its nonstop service between LaGuardia and Atlanta, Cleveland and Minneapolis. But it is adding service to 11 cities as a result of the merger. Tulsa wasn’t on that list, either.

Kyle Arnold 918-581-8380

kyle.arnold@tulsaworld.com ___

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