American Airlines Hits Record Revenues, Lags in Profit

American Airlines reported record-high revenues of $53 billion and a $822 million net profit for 2023. This compares to $127 million in 2022, which is $1.9 billion without special items and corresponds with a 5.7 percent operating margin. The numbers al lower than those reported by Delta and United Airlines. Revenues of $52.8 billion were up from $49 billion year on year, with passenger revenues up 8.8 percent to $48.5 billion and other revenues by 9.3 percent to $3.5 billion. Cargo income saw a 34.1 percent drop to $812 million. AA’s operating expenses were up by 5 percent to $49.8 billion. Salary costs grew 12.4 percent to $14.6 billion and exceeded fuel costs of $12.3 billion, 12.7 percent down year on year. The operating income was $3.034 billion versus $1.607 billion. Included is a $603 million provision for income taxes. American’s Q4 produced a $19 million net income or $192 million without special items at a 5.1 percent operating margin. The Thanksgiving and December holiday seasons have generated good revenues, although they were 1 percent down year on year to $13.1 billion. Only other revenues improved by 7.2 percent to $853 million. Expenses increased by 5.1 percent to $12.4 billion, resulting in an operating profit of $656 million, down from $1.383 billion in Q4 2022. Full-year, American carried 210.7 million passengers, up from 199.3 million. Total international passenger revenue miles (RPM) grew by an average of 15.6 percent year-on-year to 76.6 million. RPMs to the Pacific region more than doubled to 6.6 million, while those on the transatlantic were up by 18.2 percent to 36.6 million. Latin America saw only 2.7 percent RPM growth to 33.3 million, but this is a short-term issue that improves as partnerships with other airlines expand. US domestic RPMs increased by 4 percent to 155.4 million. CEO Robert Isom was particularly happy with the strong operational performance when it produced an industry-leading completion factor of 98.9 percent and on-time performance of 69.5 percent. Also doing very well was the AAdvantage loyalty program, which has welcomed 51 percent more members since 2019. Reducing debt American Airlines strengthened the balance sheet and reduced debt by $3.2 billion to $43 billion, down $11.4 billion from the $54 billion in Q2 of 2021. Debt is expected to come down another $1.6 billion by the end of the year or to $13 billion by 2021. The goal is to reduce debt by $15 billion by the end of next year. The airline ended 2023 with around $10.4 billion in liquidity. For 2024, the focus will be to remain the most reliable US airline. Full-year capacity will see mid-single-digit growth year-on-year and exceed 2019 levels again. For Q1, capacity growth is guided between 6.5 and 8.5 percent. Total revenues per available seat mile (TRASM) will be -3.5 to -5.5 percent in Q1 and flat to -3.0 percent for the full year, with costs per available seat mile (CASM) excluding fuel guided at +2 to +4 percent for Q1 and +0.5 and +3.5 percent for 2024. The adjusted operating margin will be around 0.0 to 0.2 percent in the first quarter but exceed 2023 levels for the full year at 6.0 to 9.0 percent. EPS is guided at $-0.15 to $-0.35 for Q1 and $2.25 to $3.25 for FY24, which sent shares up today as this exceeded analysts’ expectations. American Airlines ended the year with 965 aircraft in the mainline fleet and 556 in the regional fleet. The mainline fleet grew with 23 aircraft last year and should see 28 inductions in 2024, including 20 Boeing MAX 8s, six 787-9s, and 2 Airbus A321neo. Aircraft Capex is expected to be $2.3 billion. Chief Financial Officer Devon May said that negotiations are ongoing for more aircraft to be delivered later this decade and in the early 2030s. With a young fleet, AA has very modest aircraft replacement needs, resulting in an average Capex of some $3.5 billion between 2025 and 2030. American will share its future strategy on March 4 during Investor's Day.

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