American Airlines Group Inc. (AAL) on Q1 2023 Results - Earnings Call Transcript
Operator: Thank you for standing by, and welcome to American Airlines Group's First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions. I would now like to hand the call over to Scott Long, Vice President of Investor Relations and Corporate Development. Please go ahead. Scott Long: Thank you, Atif. And good morning, everyone. Welcome to the American Airlines Group first quarter 2023 earnings conference call. On the call this morning with prepared remarks, we have our CEO, Robert Isom, our CFO, Devon May, and a number of our other senior executives are also in the room for the Q&A session. Robert is going to start the call this morning with an overview of our performance and Devon's will follow with details on the first quarter and we'll outline our operating plans and outlook going forward. After our prepared remarks, we'll open the call for analyst questions, followed by questions from the media. To get in as many questions as possible, please limit yourself to one question and one follow-up. And before we begin today, we must state that today's call contains forward-looking statements, including statements concerning future revenues, costs, forecast of capacity and fleet plans. These statements represent our predictions and expectations of future events. The numerous risks and uncertainties could cause actual results to differ from those projected. Information about some of these risks and uncertainties can be found in our earnings press release that was issued this morning as well as our Form 10-Q for the quarter ended March 31, 2023. In addition, we'll be discussing certain non-GAAP financial measures this morning, which exclude the impact of unusual items. A reconciliation of those numbers to the GAAP financial measures is included in the earnings press release, which can be found in the Investor Relations section of our website. A webcast of this call will also be archived on our website. The information we're giving you on the call this morning is as of today's date, and we undertake no obligation to update the information subsequently. Thank you for your interest and joining us this morning. And with that, I'll turn the call over to our CEO, Robert Isom. Robert Isom: Thanks, Scott. Good morning, everyone. American is off to a fantastic start in 2023. This year, we remain focused on reliability, profitability, strengthening our balance sheet and holding ourselves accountable along the way. This morning, American reported a first quarter profit for the first time in four years, an improvement of almost $2 billion versus the first quarter of 2022. Our performance in the first quarter was driven by continued strength and demand and the tremendous work of our team. American entered the year in a position of strength after the outstanding results our team delivered in 2022 and we built on that momentum in the first quarter. The American Airlines team ran a reliable operation for our customers and delivered profit for the quarter, beating our initial EPS guidance of approximately breakeven. Let's talk more about our first quarter results. We produced record first quarter revenues of nearly $12.2 billion, an increase of 37% versus 2022 on 9.2% more capacity year-over-year. Demand for our product remains strong. We continue to be very pleased with our domestic and short haul international unit revenue performance. We've also seen noticeable strength in long haul international demand, though we have allocated approximately 80% of our second quarter capacity growth year-over-year and continue to see strong yield performance carrying into the summer months. Demand for our premium cabin has been remarkable across all entities, with premium paid load factor and RASM exceeding 2019 levels. We're well on our way to a fully recovered business but we aren't there yet. The recovery is still unfolding and the current demand environment remains dynamic. We continue to learn about evolving customer preferences and changing demand patterns, and we spent the past three years building a resilient airline that can adjust to the variability in demand. We remain nimble and continue to adapt to customer behaviors, both in terms of when and where customers book travel and how we service them. Importantly, customers continue to show preference for our direct channels and travel rewards program. Our co-brand growth continues to outperform consumer spending, in line with AAdvantage enrollment, which are now approximately 60% higher than 2019 on capacity that has not yet fully restored to 2019 levels. The American Airlines co-brand portfolio is delivering the fastest growth since the inception of our current agreements with double-digit growth in sales versus the first quarter of 2022. Now let's turn to the operation. The American Airlines team delivered a stellar performance in the first quarter. We operated more than 476,000 flights in the quarter with an average load factor of 80%. We delivered our best ever first quarter completion factor and controllable completion factor, safely completing more flights and more on-time flights than anyone in the industry. We're performing better than ever from an operational perspective. We delivered this strong performance in the first quarter despite the nationwide ground stop in mid-January due to the NOTAM outage and several disruptive weather events that impacted our hubs across the country. Our largest hub, DFW, was greatly impacted by winter storms in January and February, and tornadoes and severe thunderstorms in March. Our strong operational performance is driven by our team's focus on running a safe and reliable airline and taking care of what we can control. Investments in our operation have enabled us to anticipate the operating conditions ahead of us and recover quickly when the unexpected happens. And we'll continue to invest in our team, fleet and technology, so that we're well prepared heading into the summer and the rest of the year. I also want to thank and acknowledge the DoT and the FAA for their efforts to reduce congestion in New York, which will certainly help the industry deliver more reliably for customers this summer. And now over to Devon to share more about our first quarter results and the outlook for the second quarter. Devon May : Thank you, Robert. I'm tremendously proud of what the American Airlines team accomplished during the first quarter. As Robert mentioned, we ran a great operation and delivered on our financial guidance for the quarter, keeping us on track with the full year plan we outlined in January. During the first quarter, excluding net special items, we reported net income of $33 million or adjusted earnings per diluted share of $0.05. This result is better than the initial guidance we provided in January, driven by strong revenue production and slightly lower fuel expense during the quarter. As Robert mentioned, we produced record first quarter revenue of $12.2 billion, up 37% year-over-year. Unit revenue was 25.4% higher in the quarter on 9.2% more capacity. Unit costs for the quarter excluding net special items and fuel were 1.4% lower year-over-year, in line with the midpoint of our initial guidance range. We generated adjusted operating income in the quarter of $451 million, resulting in a first quarter adjusted operating margin of 3.7%. We have made significant investments in our fleet over the past decade and these investments are paying off. The re-fleeting of the airlines and the reconfiguration of our narrowbody interiors have greatly improved the customer experience, simplified our mainline fleet from eight aircraft size to four, and aligned our narrowbody density with our network competitors. American continues to operate the simplest and youngest fleet among US network carriers. We continue to expect to reactivate nine 737s from long-term storage and take delivery of 23 new aircraft in 2023. We took three deliveries in the first quarter and expect nine in the second quarter, five in the third quarter and six in the fourth quarter. 13 of the deliveries are already financed and we expect to finalize financing agreement for the remaining 10 this quarter. Based on the latest delivery guidance from Boeing and Airbus, our 2023 aircraft CapEx is expected to be approximately $1.5 billion and non-aircraft CapEx is expected to be approximately $800 million. In the first quarter, we generated operating cash flow of $3.3 billion. Our adjusted net investing cash flows were $317 million, resulting in record quarterly free cash flow generation of $3 billion. We ended the quarter with $14.4 billion of total available liquidity, $2.4 billion more than our year-end 2022 liquidity balance, driven by booking strength and ATL growth in the quarter. We continue to make progress on strengthening our balance sheet, reducing total debt by more than $850 million in the quarter. This debt reduction, combined with the improvement in liquidity, resulted in a $3.4 billion decrease in net debt during the first quarter. We now have reduced total debt by more than $9 billion from peak debt levels in mid-2021. Importantly, we ended the first quarter with a net debt to EBITDA ratio of 4.5 times, which is lower than our net debt to EBITDA ratio at the end of 2019. By the end of 2023, we continue to expect our total debt to be $10 billion to $11 billion lower than peak debt levels in mid-2021, and we remain committed to our goal of reducing total debt by $15 billion by the end of 2025. Additionally, a constructive financing environment in February allowed us to proactively refinance the 2025 maturity, our $1.75 billion term loan primarily collateralized by our South American portfolio of slots, gates and routes. The refinancing transaction efficiently derisked our 2025 debt maturity tower by nearly 20%. We will continue to balance debt reduction opportunities and investments in the business, while meeting appropriate liquidity levels. We continue to see a constructive demand environment in the second quarter and summer and bookings remain strong. Revenue intakes in the past month are well ahead of the same booking period in 2019, including robust international bookings as customers returned to long haul international travel this summer. Compared to the historically strong unit revenue we produced in 2022, we expect second quarter TRASM to be down 2% to 4% year-over-year on 3.5% to 5% more capacity. We expect second quarter CASMx to be up 3.5% to 5.5% year-over-year. This projection includes the impact of an anticipated pilots agreement. We continue to expect the full year impact of all anticipated labor agreements to be approximately 3 points of CASMx. Our current forecast for the second quarter assumes a fuel price of between $2.65 and $2.75 per gallon, which is $1.30 per gallon lower year-over-year. We expect to produce an operating margin of between 11% and 13% in the second quarter based on our current demand and fuel price forecast. Excluding special items, we expect to produce earnings of between $1.20 and $1.40 per diluted share in the second quarter. These strong results keep us on track to execute on our full year earnings guidance of between $2.50 and $3.50 per diluted share. Now, I'd like to hand it back to Robert for further remarks. Robert Isom : Thanks, Devon. And to close, I'd like to take just a few minutes to highlight why I'm so excited about the future of the industry and the future of American Airlines, in particular. Our industry has been through the biggest crisis in its history and is now on the other side. Airlines have navigated a lot over the last few years. Concerns about the economy and demand recovery, the banking crisis, the interest rate environment, supply chain issues, and yet here we are. The industry is in an excellent position and benefiting not only from the recovery involving travel patterns, but also from consumers' changing preference of experiences, over hard goods. And I'd like to underscore, we see a strong demand environment this summer, and we're highly confident that that will continue going forward. If there's one thing that the pandemic has taught us, it's that people innately desire to travel. And at American, the actions that we've taken in recent years are producing returns. We've simplified and harmonized our fleet to provide more flexibility to our network, which is nimbler and more focused on our most profitable flying. And our Sunbelt hubs are uniquely positioned to take advantage of demographic changes going on in the US right now. We've got partnerships that are a great complement to our network, enable us to provide even more unique O&Ds to our customers. Our fleet, which is younger than our network peers, has [ph] low CapEx requirements in the near term, enabling us to generate free cash flow that can be used to reinvest in the business and strengthen our balance sheet. We've also made investments to modernize our facilities and introduce new technology throughout the airline. These initiatives are producing the results that we had hoped for. And we have a number of opportunities in front of us to deliver even more value. We're making terrific progress training pilots, getting our regional fleet back up in the air and getting more out of our mainline fleet as well. That means that there is real and significant upside in terms of the utilization of our existing assets. We're also very encouraged by our operational focus, and our ability to grow the airline efficiently, all while completing more flights on schedule, generating more revenue and reducing costs. On the commercial side, we're building on our premier loyalty program, and the changes we have made are having a real impact on how customers are spending and engaging with us. There's even more we'll do in the coming years to grow AAdvantage and our co-brand offerings. We're meeting our customers where they want to do business and bringing more people into our direction channel. We'll continue to adapt our offerings based on evolving customer preferences. Finally, we are driving a technology first mindset at American, not only with existing processes, but also with the introduction of new tools for our customers and team. We look forward to sharing more on all of this as the year progresses. Looking ahead, we feel great about the industry and what's to come for American. The actions that we have taken have put us in a position of strength that have allowed us to capitalize on the recovery. We'll continue to hold ourselves accountable to produce stronger margins, generate free cash flow, strengthen our balance sheet and run a reliable operation, ultimately creating more value for our customers and shareholders. And with that, operator, please open the line for analyst questions. Operator: [Operator Instructions]. First question comes from the line of David Vernon of Bernstein. Operator: Our next question comes from the line of Helane Becker of Cowen. Operator: Our next question comes from the line of Duane Pfennigwerth of Evercore. Operator: Our next question comes from the line of Andrew Didora of Bank of America. Operator: Our next question comes from the line of Ravi Shanker of Morgan Stanley. Operator: Our next question comes from the line of Conor Cunningham of Melius Research. Operator: Our next question comes from the line of Michael Linenberg of Deutsche Bank. Operator: Our next question comes from the line of Jamie Baker of J.P. Morgan. Operator: [Operator Instructions]. And our first question comes from the line of Alison Sider of WSJ. Operator: Our next question comes from the line of Mary Schlangenstein of Bloomberg. Operator: Our next question comes from the line of Leslie Josephs of CNBC. Operator: I would now like to turn the conference back to Robert Isom for closing remarks. Sir? Robert Isom: Thank you very much. And thanks for the interest. Look, we're really pleased with the progress that we've made at American. We set out with the goal of becoming a more reliable airline and becoming profitable. And we've done a remarkable job. Our team has done a remarkable job over the last year of getting us into this position – industry-leading operational reliability and then profitability, which is our fourth quarter in a row, record revenue production. When I take a look year-over-year, it's astounding that we're $2 billion in terms of pre-tax – better than we were just a year ago. As project out for the year, we anticipate record revenues in the second quarter. So all that is very positive. But I get asked questions about why isn't our stock price performance moving in alignment with seemingly improved prospects. And in fact, our guidance for the year in terms of EPS from analysts would be 25% below where we're guiding. Can I just say to that right now? No luck. It's due to people not knowing the American story, possibly. And in that case, we've got to get out and do a better job of letting folks know what we see and where things are headed. And if it's not that, they don't believe our story. In that case, we're just going to keep producing. Every quarter that we have a chance, we're going to talk about those things that are most meaningful to creating shareholder value. And that's earnings and generating free cash flow. And we'll keep producing until people do believe. And for those that just want to see another chapter of the book and have some concerns about some issues that we may encounter over the next three, six months or so, hey, we'll play that out too. We're really confident no matter what comes our way that we'll react in a fashion that still preserves our focus on making sure we run reliably and ultimately profitably as well. So I appreciate everybody's interest, and we'll get back to work. Thanks very much. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
American Airlines Posts Mixed Q1 Results, Pulled Outlook
American Airlines (NASDAQ:AAL) reported a smaller-than-expected loss for the first quarter of 2025 but missed on revenue and pulled its full-year guidance.
The airline posted an adjusted loss of $0.59 per share, outperforming analyst expectations of a $0.62 loss. Revenue totaled $12.6 billion, coming in just below the $12.68 billion forecast, and representing a modest 0.7% year-over-year increase.
Despite progress in narrowing losses, the company withdrew its full-year forecast, citing persistent economic uncertainty. For the second quarter, it expects adjusted earnings per share between $0.50 and $1.00—a wide range that straddles analyst estimates of $0.96.
International routes continued to perform well, lifting total unit revenue by 0.7% compared to a year ago. However, softness in domestic leisure demand, tied to broader economic concerns, remains a headwind.
On the financial front, American Airlines generated $1.7 billion in free cash flow and used part of it to reduce its debt by $1.2 billion, ending the quarter with $10.8 billion in available liquidity.
American Airlines Posts Mixed Q1 Results, Pulled Outlook
American Airlines (NASDAQ:AAL) reported a smaller-than-expected loss for the first quarter of 2025 but missed on revenue and pulled its full-year guidance.
The airline posted an adjusted loss of $0.59 per share, outperforming analyst expectations of a $0.62 loss. Revenue totaled $12.6 billion, coming in just below the $12.68 billion forecast, and representing a modest 0.7% year-over-year increase.
Despite progress in narrowing losses, the company withdrew its full-year forecast, citing persistent economic uncertainty. For the second quarter, it expects adjusted earnings per share between $0.50 and $1.00—a wide range that straddles analyst estimates of $0.96.
International routes continued to perform well, lifting total unit revenue by 0.7% compared to a year ago. However, softness in domestic leisure demand, tied to broader economic concerns, remains a headwind.
On the financial front, American Airlines generated $1.7 billion in free cash flow and used part of it to reduce its debt by $1.2 billion, ending the quarter with $10.8 billion in available liquidity.
American Airlines Group Inc. (NASDAQ:AAL) Misses EPS Estimates but Surpasses Revenue Expectations
- American Airlines reported an EPS of -$0.23 for October 24, 2024, missing the estimated EPS of $0.13 but surpassed revenue expectations with $13.65 billion.
- The company has released a promising fourth-quarter forecast, suggesting a potential strong performance in the upcoming quarter.
- Despite mixed results in the airline industry, AAL's recent earnings report and future outlook are crucial for investors comparing its performance to competitors like United Airlines and Delta Air Lines.
American Airlines Group Inc. (NASDAQ:AAL) is a major player in the airline industry, providing passenger and cargo services across the globe. The company competes with other giants like United Airlines and Delta Air Lines. Recently, AAL reported an earnings per share (EPS) of -$0.23 for October 24, 2024, missing the estimated EPS of $0.13. However, it surpassed revenue expectations with $13.65 billion, compared to the anticipated $13.47 billion.
Despite the EPS miss, American Airlines has released a promising fourth-quarter forecast, exceeding analysts' expectations. This positive outlook suggests a potential strong performance in the upcoming quarter, as highlighted by CNBC. Such forecasts can influence investor sentiment and potentially impact AAL's stock price positively.
The airline industry has shown mixed results this earnings season. United Airlines saw a stock surge after an earnings beat, while Delta Air Lines fell short of expectations. Investors are closely monitoring AAL's performance to see how it compares to its competitors, as noted by Barron's. The company's recent earnings report and future outlook are crucial in this context.
Analysts had projected AAL's third-quarter earnings at $0.13 per share, a significant 65.8% decline year-over-year. However, revenue expectations were slightly higher at $13.49 billion, a 0.1% increase from the previous year. Over the past month, the consensus EPS estimate was revised upward by 43.1%, indicating a positive reassessment by analysts, which often affects investor reactions and short-term stock price movements.
Currently, AAL's stock price is $12.83, reflecting a decrease of 1.0031% or $0.13. The stock has traded between $12.66 and $13.035 today, with a 52-week high of $16.15 and a low of $9.07. The company's market capitalization is approximately $8.43 billion, with a trading volume of 29.69 million shares.
American Airlines Group Inc. (NASDAQ:AAL) Misses EPS Estimates but Surpasses Revenue Expectations
- American Airlines reported an EPS of -$0.23 for October 24, 2024, missing the estimated EPS of $0.13 but surpassed revenue expectations with $13.65 billion.
- The company has released a promising fourth-quarter forecast, suggesting a potential strong performance in the upcoming quarter.
- Despite mixed results in the airline industry, AAL's recent earnings report and future outlook are crucial for investors comparing its performance to competitors like United Airlines and Delta Air Lines.
American Airlines Group Inc. (NASDAQ:AAL) is a major player in the airline industry, providing passenger and cargo services across the globe. The company competes with other giants like United Airlines and Delta Air Lines. Recently, AAL reported an earnings per share (EPS) of -$0.23 for October 24, 2024, missing the estimated EPS of $0.13. However, it surpassed revenue expectations with $13.65 billion, compared to the anticipated $13.47 billion.
Despite the EPS miss, American Airlines has released a promising fourth-quarter forecast, exceeding analysts' expectations. This positive outlook suggests a potential strong performance in the upcoming quarter, as highlighted by CNBC. Such forecasts can influence investor sentiment and potentially impact AAL's stock price positively.
The airline industry has shown mixed results this earnings season. United Airlines saw a stock surge after an earnings beat, while Delta Air Lines fell short of expectations. Investors are closely monitoring AAL's performance to see how it compares to its competitors, as noted by Barron's. The company's recent earnings report and future outlook are crucial in this context.
Analysts had projected AAL's third-quarter earnings at $0.13 per share, a significant 65.8% decline year-over-year. However, revenue expectations were slightly higher at $13.49 billion, a 0.1% increase from the previous year. Over the past month, the consensus EPS estimate was revised upward by 43.1%, indicating a positive reassessment by analysts, which often affects investor reactions and short-term stock price movements.
Currently, AAL's stock price is $12.83, reflecting a decrease of 1.0031% or $0.13. The stock has traded between $12.66 and $13.035 today, with a 52-week high of $16.15 and a low of $9.07. The company's market capitalization is approximately $8.43 billion, with a trading volume of 29.69 million shares.
American Airlines Slashes Full-Year Guidance Despite Slight Q2 Earnings Beat
American Airlines (NASDAQ:AAL) slashed its full-year earnings guidance, overshadowing a minor beat in second-quarter earnings.
The airline reported adjusted earnings of $1.09 per share, slightly surpassing the analyst estimate of $1.07. However, quarterly revenue fell short of expectations, coming in at $14.3 billion compared to the Street estimate of $14.39 billion.
Despite achieving a 2% year-over-year increase in second-quarter revenue, setting a company record, American Airlines revised its full-year earnings guidance significantly downward. The new range is $0.70 to $1.30 per share, starkly below the Street estimate of $1.81 and the previous guidance of $2.25 to $3.25.
The midpoint of the revised guidance, $1.00, indicates a much more conservative outlook from the airline. For the third quarter of 2024, American Airlines expects earnings per share to be approximately breakeven, reflecting the ongoing effects of its earlier sales strategy. CEO Robert Isom attributed the second-quarter challenges to the company's prior sales and distribution strategies, as well as an imbalance in domestic supply and demand.
American Airlines Slashes Full-Year Guidance Despite Slight Q2 Earnings Beat
American Airlines (NASDAQ:AAL) slashed its full-year earnings guidance, overshadowing a minor beat in second-quarter earnings.
The airline reported adjusted earnings of $1.09 per share, slightly surpassing the analyst estimate of $1.07. However, quarterly revenue fell short of expectations, coming in at $14.3 billion compared to the Street estimate of $14.39 billion.
Despite achieving a 2% year-over-year increase in second-quarter revenue, setting a company record, American Airlines revised its full-year earnings guidance significantly downward. The new range is $0.70 to $1.30 per share, starkly below the Street estimate of $1.81 and the previous guidance of $2.25 to $3.25.
The midpoint of the revised guidance, $1.00, indicates a much more conservative outlook from the airline. For the third quarter of 2024, American Airlines expects earnings per share to be approximately breakeven, reflecting the ongoing effects of its earlier sales strategy. CEO Robert Isom attributed the second-quarter challenges to the company's prior sales and distribution strategies, as well as an imbalance in domestic supply and demand.
American Airlines Shares Drop 7% on Lowered Q2 Profit Forecast
On Tuesday, American Airlines (NASDAQ:AAL) revised its second-quarter profit forecast downward due to weaker pricing power, causing its shares to drop about 7% in pre-market today.
The airline announced that Chief Commercial Officer Vasu Raja, who has been leading the new business strategy, will depart in June. American Airlines now anticipates second-quarter adjusted earnings between $1.00 and $1.15 per share, down from the previous forecast of $1.15 to $1.45 per share. The company also expects total revenue per available seat mile, an indicator of pricing power, to decline by 5% to 6% compared to a year ago, worse than the earlier projection of a 1% to 3% decrease.
Analysts have expressed doubts about American's strategy to differentiate itself from competitors. The airline has moved away from targeting corporate travel customers and is focusing on expanding its market share in smaller markets. Some analysts are skeptical that this approach will generate enough revenue to compete effectively with United and Delta Air Lines.
In the first quarter, American's business revenue increased by high-single digits year-over-year, compared to double-digit growth at Delta and United. Additionally, American's seat growth in the domestic market remains high, which analysts say is negatively impacting its pricing power.
