Southwest and American Report Q2 Results

Southwest

and American, the two Texas-based major airlines, reported 2nd quarter earnings. The picture is somewhat mixed, despite the industry’s resilience during the Iran War and rising fuel prices over the last few months.

Both carriers reported record operating revenues, $16.7 billion for American and $8.4 billion for Southwest. But things diverged from there. Southwest, which is roughly 1/2 of American’s size, reported pre-tax income three times higher than its larger competitor. While the second quarter was slightly profitable for American, it is typically the second most profitable, with the spring shoulder and peak summer travel season beginning. American’s operating margin was 2.7% during the quarter, with Southwest clocking in at 3.4%. But both pale in comparison to the 9.4% from Delta and 6.2% from United, which reported their results last week and are projecting double-digit growth.

American’s Weak Performance and Balance Sheet

At American, passenger load factors fell year-over-year in the quarter from 84.7% to 83.2%. While TRASM climbed 10.3% from 18.54 to 20.45 cents year over year, operating expenses grew 16.5% from 17.08 to 19.90. The average fuel price climbed to $4.05 per gallon, up from $2.29 per gallon last year, accounting for most of the cost increase. American was able to eke out a small net profit of $71 million on $16.7 billion of revenue. When compared with last year’s second quarter loss of $311 million, the turnaround is welcome. The transcript for American’s earnings call can be found here, and the Form 10-Q for the quarter here.