American Airlines (AAL) Posts Narrower-Than-Expected Q2 Loss

American Airlines’ AAL second-quarter 2021 loss puts it in the same boat alongside Alaska Air Group ALK, United Airlines UAL and Delta Air Lines DAL as all suffered a similar setback.

The airline incurred a loss (excluding $1.72 from non-recurring items) of $1.69 per share, comparing favorably with the Zacks Consensus Estimate of a loss of $1.71. Quarterly loss per share was also narrower than the year-ago loss of $7.82.

American Airlines Group Inc. Price, Consensus and EPS Surprise

American Airlines Group Inc. Price, Consensus and EPS Surprise
American Airlines Group Inc. price-consensus-eps-surprise-chart | American Airlines Group Inc. Quote

Operating revenues of $7,478 million skyrocketed 361.04% year over year and also surpassed the Zacks Consensus Estimate of $7,425.6 million. This massive year-over-year jump reflects improving air-travel demand as more and more people take to the skies following widespread vaccination. Revenues soared 87% sequentially.

Passenger revenues, which accounted for bulk of the top line (87.5%), increased to $6545 million from a mere $1,108 million a year ago when the impact of coronavirus on air-travel demand was much severe. Cargo revenues surged in excess of 100% to $326 million, driven by the carrier’s focus on its cargo unit in the coronavirus era. Cargo yield per ton mile declined 20.4% in the second quarter of 2021. Other revenues increased 57.9%.

Total revenue per available seat mile (TRASM: a key measure of unit revenues) increased to 13.71 cents from 9.5 cents a year ago. Passenger revenue per available seat miles (PRASM) climbed 85% to 12 cents in the period. Consolidated yield inched up 1.7%.

Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) rose to 42 million in the reported quarter from a mere 7.2 million a year ago. To cater to this increased demand, capacity (measured in average seat miles) expanded to 54.6 million from 17.1 million. Consolidated load factor (percentage of seats filled by passengers) increased 34.7 percentage points to 77% in the second quarter of 2021.

Total operating costs (on a reported basis) escalated 71.3% to $7,037 million with expenses pertaining to aircraft fuel and related taxes skyrocketing to $1,611 million from $309 million a year ago. Average fuel price per gallon (including related taxes) climbed to $1.91 from $1.13 a year ago as oil prices move north. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) declined 60.6% to 12.61 cents.

Other Details

Driven by a better air-travel demand scenario, American Airlines, currently carrying a Zacks Rank #3 (Hold), succeeded in turning its daily cash burn rate into a positive for the second quarter. During the quarter, cash build rate was approximately $1 million per day. The carrier exited the second quarter with available liquidity of $21.3 billion. The carrier expects total liquidity of $10 billion in 2022 (earlier guidance: $12 billion).

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American Airlines expects system capacity for the September quarter to decline in the 15-20% range from the figure reported in third-quarter 2019. Total revenues in the third quarter of 2021 are anticipated to decline 20% from the level recorded in third-quarter 2019. Fuel cost per gallon in third-quarter 2021 is expected in the $2.10-$2.15 band. Fuel gallon consumption is expected to be $964 million. CASM excluding fuel and special items in the September quarter is expected to increase in the 8-12% range from the number reported in third-quarter 2019. Pre-tax margin (excluding net special items) for the September quarter is anticipated between -3% and -7%.

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