US Markets
Thursday, October 19th, 2023 1:52 pm EDT
Key Points
- Third-Quarter Loss and Profit Forecast Revision: American Airlines posted a third-quarter loss, with a reported deficit of $545 million, equivalent to 83 cents per share. This marked the airline’s first quarterly loss since Q1 2022. The loss was primarily attributed to higher fuel prices, which significantly impacted the company’s operational costs. In response to these challenges, American Airlines revised its full-year profit forecast. The company now anticipates earning between $2.25 and $2.50 per share, on an adjusted basis, for the year. This adjustment is a reduction from the prior estimate of $3 to $3.75 per share, which was made in July.
- Q3 Performance and Q4 Outlook: In the third quarter, American Airlines reported adjusted earnings per share of 38 cents, exceeding the expected 25 cents, according to analysts’ estimates. However, the total revenue for the quarter amounted to $13.48 billion, slightly below the anticipated $13.52 billion. For the fourth quarter, the airline projected that it would break even. In this quarter, American Airlines expects a unit revenue decline of 5.5% to 7.5% from the prior year, along with unit costs (excluding fuel) increasing by 5% to 7% year over year. Capacity is also anticipated to rise by 4.5% to 6.5% compared to the same period in 2022.
- Operating Margin and Positive Cost Control: American Airlines expects to achieve a full-year adjusted operating margin of 7%, which is a reduction from its earlier forecast that had a margin as wide as 10%. Despite challenges such as higher fuel costs, the company remains committed to controlling what it can amid the changing environment. Adjusting for the increased costs associated with the pilots’ new labor agreement, American Airlines reported earnings of $263 million, equivalent to 38 cents per share. While the company faced hurdles, CEO Robert Isom emphasized the importance of its team’s ability to manage factors under their control as they strive for success. The article also notes that revenue increased by 0.1% compared to the year-ago period.
American Airlines reported a third-quarter loss of $545 million, or 83 cents per share, marking its first quarterly loss since Q1 2022. The airline attributed this loss primarily to higher fuel prices, which have affected its operational costs significantly. In contrast, the same period last year saw American Airlines post a profit of $483 million, or 69 cents per share, reflecting the financial challenges the airline industry continues to face due to ongoing turbulence related to the pandemic and rising fuel costs.
As a response to these challenges, American Airlines revised its full-year profit forecast, now expecting to earn between $2.25 and $2.50 per share on an adjusted basis. This represents a downward adjustment from the previous estimate made in July, which projected earnings between $3 and $3.75 per share. While this adjustment reflects a reduced profit outlook, it aligns with the expectations of industry analysts who have been monitoring the airline’s performance closely.
In addition to revising its profit forecast, American Airlines also adjusted its full-year adjusted operating margin forecast. The previous margin estimate, which had a range of up to 10%, has been lowered to 7%. The adjustments reflect the airline’s efforts to navigate the challenging economic environment and minimize the impact of rising costs.
Despite the overall Q3 loss, there were some positive aspects in American Airlines’ financial report. In terms of adjusted earnings per share, the airline reported 38 cents, surpassing the 25 cents that analysts had anticipated. However, the total revenue for the quarter came in at $13.48 billion, slightly below the expected $13.52 billion. This mixed performance in Q3 underscores the volatile and uncertain nature of the airline industry’s recovery.
Looking ahead to the fourth quarter, American Airlines anticipates breaking even. The airline expects to see a unit revenue decline of between 5.5% and 7.5% compared to the same period in the previous year. Furthermore, unit costs, excluding fuel, are projected to increase by 5% to 7% year over year. American Airlines also estimates that its capacity will rise by 4.5% to 6.5% in comparison to the fourth quarter of 2022.
American Airlines continues to face significant challenges amid fluctuating demand, economic uncertainty, and higher operational costs. The revised profit forecast and the loss in the third quarter highlight the impact of these challenges on the airline’s financial performance. The company remains focused on adjusting its strategies and costs to navigate these headwinds and ensure long-term sustainability.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/19/american-airlines-aal-earnings-q3-2023.html
