In explaining the $2 billion quarterly loss at American, the carrier's new chief executive told employees the financial reports are complicated.
Even though American and US Airways merged on December 9, according to general accounting rules, only those 23 days of financial operations can be included in the results. However, they are compared to American's stand alone results in the fourth quarter of 2012.
On top of that, the company has to report $2 billion in reorganization charges and bankruptcy claims as American emerged from bankruptcy protection on the same day as the merger.
"Though the abundance of financial information this quarter may seem confusing, reporting results this way is typical following a merger," Parker told employees in a message sent out on Tuesday morning.
Keep reading for the full letter from Parker.
Dear Fellow Employees,
Today we announced our fourth quarter and 2013 financial results. This is first time we are announcing earnings following our merger and because of this our results are more complicated than usual. You will see both Generally Accepted Accounting Principle (GAAP) numbers as well as some non-GAAP numbers, and the reasons for this are outlined below. Though the abundance of financial information this quarter may seem confusing, reporting results this way is typical following a merger (the earnings for Delta-Northwest and United-Continental were similar when they first merged, too).
Our earnings report this quarter includes what is known as “non-GAAP” financial statements for the new American. Using non-GAAP results summarizes what the financial statements for our combined company would have been had we been operating as a merged entity for the entire fourth quarter (instead of just the 23 days in December after the merger closed). Companies present financial information this way following a merger to help investors benchmark the new company’s results against what prior results would have been. In addition, there may be certain adjustments to highlight the true “earnings quality” of their results, such as removing “special items” related to bankruptcy and merger accounting.
In the fourth quarter our non-GAAP combined net profit excluding net special charges totaled $436 million, a $478 million improvement versus the fourth quarter 2012 net loss. For full year 2013, non-GAAP combined net profit excluding net special charges was $1.9 billion, a $1.5 billion improvement versus a full year 2012 net profit.
We will continue to report our results on a non-GAAP basis until 2015 when we have a true apples-to-apples comparison of our performance on a year-over-year basis.
We’re less than two months into the integration of our two airlines, and already we’ve hit a number of key integration milestones, including:
- Launched the first phase of codesharing which offers customers improved access to the company’s global network by allowing them to book select flights on both airlines' networks
- Provided reciprocal benefits for Club members and Elite members, including priority check-in, waiver of fees for checked bags, complimentary access to preferred seats, priority security, early boarding and priority baggage delivery
- Allowed AAdvantage® and Dividend Miles members to earn and redeem miles when traveling across either airline's network
- Trained more than 85,000 customer-facing employees
Thank you again for all you are doing to take care of our customers. We have a lot of integration work ahead for sure, and we are off to a great start.