American Airlines (AAL) Beats Q2 Earnings, Raises FY23 View
American Airlines’ AAL second-quarter 2023 earnings (excluding 4 cents from non-recurring items) of $1.92 per share easily beat the Zacks Consensus Estimate of $1.58. Results were aided by lower costs and higher revenues. Buoyant air-travel-demand scenario added to the positives. In the year-ago quarter, AAL reported earnings of 76 cents as air-travel demand was not so robust back then.
Operating revenues of $14,055 million increased 4.7% year over year. The top line beat the Zacks Consensus Estimate of $13,736.3 million. Demand was particularly strong in June on the back of an increase in close-in bookings.
Passenger revenues, accounting for 92.3% of the top line, increased to $12,978 million from $12,223 million a year ago, driven by strong air-travel demand mainly on the domestic front. The metric surpassed our estimate of $12,525.3 million.
Cargo revenues decreased 39.8% to $197 million. The actual decline in cargo revenues was steeper than our expectation of a 10% fall from second-quarter 2022 actuals to $285.2 million. Other revenues inched up 1.1% to $880 million, also ahead of our expectation of $870.2 million.
Apart from earnings and revenue beat, management raised its earnings per share outlook for the current year, driven by rosy air-travel-demand scenario. The company now expects 2023 earnings (on an adjusted basis) in the band of $3-$3.75 per share (earlier view was in the $2.5-$3.5 per share range). The Zacks Consensus Estimate of $3.03 per share lies below the mid-point of the guided range.
More on Q2 Earnings Report
Total revenue per available seat miles (a key measure of unit revenue: TRASM) decreased to 20.18 cents from 20.29 cents a year ago. Passenger revenue per available seat miles (PRASM) inched up 0.8% to 18.63 cents, backed by an uptick in air-travel demand. The actual PRASM figure was greater than our expectation of 18.16 cents. Consolidated yield grew 1.7% to 21.62 cents.
Reflecting the boost in air-travel demand, consolidated traffic (measured in revenue passenger miles) rose to 60,020 million from 57,516 million a year ago. To cater to this increased demand, capacity (measured in average seat miles) expanded to 69,658 million from 66,163 million.
Consolidated load factor (percentage of seats filled by passengers) inched down 0.7 points to 86.2%. However, the actual figure for load factor was higher than our expectation of 81.5%.
Total operating costs (on a reported basis) declined 4.1% year over year to $11,892 million, with aircraft fuel expenses and related taxes decreasing to $2,723 million from $4,020 million a year ago. Average fuel price per gallon (including related taxes) declined to $2.62 from $4.03 a year ago. The actual figure was a tad more than our estimate of $2.61 per gallon.
Consolidated operating costs per available seat mile (excluding fuel and special items) increased 3.7% to 13.16 cents. The actual figure was less than our estimate of 13.19 cents. Fuel gallon consumption increased 4.4% to $1,041million in second-quarter 2023.
American Airlines, currently carrying a Zacks Rank #3 (Hold), exited the quarter with $14.9 billion of total available liquidity. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Aspects of Outlook
Management expects third-quarter 2023 TRASM to be between 4.5% and 6.5%, lower than third-quarter 2022 actuals. System capacity for the September-end quarter is estimated to increase 5-7% from third-quarter 2022 levels.
Fuel cost per gallon is projected in the range of $2.55-$2.65 for third-quarter 2023. Fuel gallon consumption is expected to be $1,090 million. The adjusted operating margin in the September-end quarter is anticipated to be 8-10%.
The company expects total non-operating expenses to be $380 million for the third quarter. Cost per available seat miles (adjusted) is estimated to increase 2-4%. The expected new labor agreements are likely to have an impact on the metric.
AAL projects the September-end quarter's earnings per share (excluding net special items) to be in the 85- 95 cents range. The Zacks Consensus Estimate is pegged at 84 cents.
Management anticipates 2023 capacity to improve 5-8% year over year. TRASM for the full year is expected to be up low single digits from 2022 actuals. The adjusted operating margin for 2023 is estimated in the 8-10% range.
Cost per available seat miles (adjusted) is expected to increase 2-4% in 2023. Fuel cost per gallon is projected to be $2.70-$2.80 for 2023. Fuel gallon consumption is estimated to be $4,135 million for 2023. The company expects total non-operating expenses to be $1,575 million for the current year.
Q2 Performance of Other Transportation Companies
J.B. Hunt Transport Services’ JBHT second-quarter 2023 earnings of $1.81 per share missed the Zacks Consensus Estimate of $1.97 and declined 25.2% year over year.
Total operating revenues of $3,132.6 million also lagged the Zacks Consensus Estimate of $3,347.5 million. The top line fell 18.4% year over year.
The downfall was due to a decline in revenue per load of 24% in Integrated Capacity Solutions, 13% in Intermodal and 21% in Truckload. A 4% decrease in productivity in Dedicated Capacity Solutions added to the woes. Changes in customer rate, freight mix and lower fuel surcharge revenues resulted in this downtick.
Delta Air Lines’ DAL second-quarter 2023 earnings (excluding 16 cents from non-recurring items) of $2.68 per share comfortably beat the Zacks Consensus Estimate of $2.42. DAL reported earnings of $1.44 a year ago.
Revenues of $15,578 million beat the Zacks Consensus Estimate of $14,991.6 million. Total revenues increased 12.69% on a year-over-year basis driven by higher air-travel demand. The adjusted operating margin was 17.1% compared with 11.7% in the prior-year period.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
