Aircraft Exterior AA Aircraft Wing
It might be a tiny $10 million net profit, but American Airlines outperformed its main US rivals United Airlines and Delta Air Lines by producing a Q1 profit against their losses. Excluding special items, the profit would have been $33 million. The net profit is the first in Q1 in four years.
American generated a record $12.189 billion in total revenues compared to $8.899 billion in Q1 2022. This is some $600 million below Delta’s revenues but some $800 million higher than United’s. Passenger revenues contributed $11.103 billion to American’s result versus $7.818 billion last year. Cargo revenues were noticeably down year on year, to $223 million from $364 million, but this is in line with the industry-wide trend. Q1 capacity was up 9.2 percent over last year. Check here for the FY22 results.
Total international passenger revenues were $3.066 billion, up from $1.758 billion in Q 2022, with an average load factor of 79.5 percent. “The airline has seen noticeable strength in long-haul international demand and yield performance this year,” it says in its earnings release. Eighty percent of capacity growth came from international. Latin America was the strongest market for American Airlines, with $1.915 billion in pax revenues, 56.1 percent up on last year. The Atlantic almost doubled to $931 million from $466 million. The Pacific accounted for $220 million in revenues, up from a low $65 million the year before.
US domestic and short-haul international revenues increased by 32.6 percent to $8.077 billion from $6.060 billion, thanks to continued strong demand. The load factor was 80.2 percent, despite the January NOTAM issue and weather issues in the first months. The operational performance was robust, which pleased CEO Robert Isom. Demand for Premium cabins continues to be strong, with load factors and revenues outperforming 2019 levels.
Expenses and operating result
American’s Q1 operating expenses were 10.6 percent higher, to $11.8 billion from $10.6 billion. Fuel costs increased by 26.6 percent to $3.167 billion. Salaries and wages, a factor for other airlines during the quarter, were up by a modest 4.1 percent to $3.3 billion. Unit costs were 1.4 percent lower year over year.
The operating result for the quarter was $438 million versus $-1.723 billion last year. After-tax, a $10 million net profit remains, which is a significant improvement over last year’s $-1.635 billion net loss. Free cash flow was $3.0 billion. The carrier ended March with $14.4 billion in liquidity. Long-term debt and lease liabilities were down by $850 million to $31.6 billion. Since mid-2021, net debt has been reduced by $9.0 billion, and American remains committed to reducing net debt by $15 billion in 2025.
Adapting to customer behavior
While American is on its way to a full-year recovery thanks to strong bookings for this summer, Robert Isom said that American isn’t there yet. “The recovery is still unfolding and the current environment remains dynamic. We continue to learn about evolving customer preferences and changing demand patterns. We remain nimble and continue to adapt to customer behavior both in terms of when and where customers book and how we service that.” This is something that was also noted by United last week.
Still, forward bookings this summer are ahead of those in 2019, with international getting back as customers return to flying. Following the exceptionally strong Q2 in 2022, American expects total revenues per available seat mile (TRASM) to be down by two to four percent this Q2 on 3.5 to 5.5 percent more capacity.
In its outlook for Q2 and the rest of 2023, American says: “Based on demand trends and the current fuel price forecast and excluding the impact of special items, the company expects its second-quarter 2023 adjusted earnings per diluted share to be between $1.20 and $1.40. American continues to expect its full-year 2023 adjusted earnings per diluted share to be between $2.50 and $3.50. The company’s forecasts include the estimated impact of anticipated new labor agreements.” This includes an agreement with the pilots.
On the fleet, American will reactivate nine Boeing 737s from long-term storage and expects the delivery of 23 new aircraft from Boeing and Airbus this year. Three joined in Q1, nine should arrive in Q2, five in Q3, and six in Q4. New aircraft Capex is expected to be around $1.5 billion this year. Isom said that American is “making progress” in getting its regional fleet back into the air and is training new pilots.
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