American Airlines (AAL) Q4 Earnings Beat, Air Travel Surges
American Airlines’ AAL fourth-quarter 2022 earnings (excluding 3 cents from non-recurring items) of $1.17 per share surpassed the Zacks Consensus Estimate of $1.14 per share despite higher costs. In the year-ago quarter, AAL incurred a loss of $1.42 per share when air-travel demand was not as buoyant as in the present scenario. The fourth quarter of 2022 was the third consecutive profitable quarter, excluding net special items, at AAL since the onset of the pandemic.
Operating revenues of $13,189 million increased 39.9% year over year, reflecting upbeat air-travel demand. However, the top line missed the Zacks Consensus Estimate of $13,218.7 million. Buoyant air-travel demand is also reflected by the total operating revenues, which increased 16.6% from the fourth-quarter 2019 (pre-coronavirus) level despite operating at 6.1% lower capacity.
In the December-end quarter, passenger revenues, accounting for the bulk of the top line (92%), increased to $12,131 million from $8,382 million a year ago, driven by strong air-travel demand mainly on the domestic front. Cargo revenues decreased 22.9% to $263 million. Other revenues climbed 12.8%.
Total revenue per available seat miles (a key measure of unit revenue: TRASM) increased to 19.99 cents from 15.43 cents a year ago. Passenger revenue per available seat miles rose 34.1% to 18.39 cents, driven by buoyant air-travel demand. Consolidated yield increased 28.2%.
Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) rose to 55,320 million from 48,982 million a year ago. To cater to this increased demand, capacity (measured in average seat miles) expanded to 65,962 million from 61,105 million. Consolidated load factor (percentage of seats filled by passengers) increased 3.7 points to 83.9%.
Total operating costs (on a reported basis) increased 15.7% year over year to $11,806 million, with aircraft fuel expenses and related taxes skyrocketing to $3,421 million from $2,196 million a year ago. Average fuel price per gallon (including related taxes) climbed to $3.50 from $2.36 a year ago.
Consolidated operating costs per available seat mile (CASM: excluding fuel and special items) edged down 3.4% to 12.70 cents. Fuel gallon consumption increased 5.2% to $979 million in fourth-quarter 2022.
American Airlines, currently carrying a Zacks Rank #2 (Buy), exited the year with $12 billion of total available liquidity. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Driven by the soaring demand on healthy bookings, management expects first-quarter 2023 TRASM to be 24-27% higher than the first-quarter 2022 actuals.
AAL expects system capacity for the March-end quarter to increase 8-10% from the figure reported in first-quarter 2022. Fuel cost per gallon in first-quarter 2023 is expected to be $3.33-$3.38. Fuel gallon consumption is expected to be $955 million in first-quarter 2023.
The company expects total non-operating expenses of $415 million for the March-end quarter.
CASM, excluding fuel and special items, is expected to either remain flat or decrease up to 3% in the first quarter of 2023 from that reported in first-quarter 2022. The adjusted operating margin in the March-end quarter is anticipated to be 2.5-4.5%.
AAL expects the March-end quarter's earnings per share (excluding net special items) to be breakeven, in line with the Zacks Consensus Estimate. The effective tax rate is anticipated to be 23%.
The company expects 2023 capacity to improve 5-8% year over year. CASM, excluding fuel and special items, is expected to increase between 2% and 5% from the 2022 actuals. AAL anticipates paying down $15 billion of total debt by the end of 2025.
American Airlines expects full-year TRASM to be up year over year in the low-single digits. The adjusted operating margin for the current year is anticipated to be 7-9%.
AAL expects its total non-operating expense to be $1.6-$1.65 billion for 2023. Fuel cost per gallon in the current year is expected to be $3-$3.10. AAL expects 2023 adjusted earnings per share between $2.50 and $3.50. The Zacks Consensus Estimate is pegged at $1.93 per share.
A Sneak Peek Into Some Other Notable Airline Results
Let’s look at the fourth-quarter 2022 results of American Airlines’ rivals, such as Delta Air Lines DAL and United Airlines UAL.
Delta Air Lines’ earnings (excluding 19 cents from non-recurring items) of $1.48 per share beat the Zacks Consensus Estimate of $1.29 per share. DAL reported earnings of 22 cents per share a year ago, dull in comparison to the current scenario, as air-travel demand was not so buoyant then.
Delta reported revenues of $13,435 million, which surpassed the Zacks Consensus Estimate of $13,030.3 million. Driven by the high air-travel demand, total revenues increased more than 41.87% on a year-over-year basis.
United Airlines reported earnings of $2.46 per share, which beat the Zacks Consensus Estimate of $2.07 per share. In the year-ago quarter, UAL incurred a loss of $1.60 per share when air-travel demand was not as buoyant as in the current scenario.
Operating revenues of $12,400 million beat the Zacks Consensus Estimate of $12,230 million. UAL’s revenues increased 51.37% year over year due to upbeat air-travel demand.
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