By Winston Shek
American Airlines Reports First Profit Since the Start of the Pandemic
On Thursday, American Airlines revealed its numbers for the second quarter of 2021, posting its first profit since the beginning of the pandemic. Specifically, the Fort Worth, Tex.-based carrier totaled a $19 million net profit, boosted by funds via the U.S. government’s Payroll Support Program – PSP.
During the second quarter of 2021, American Airlines accumulated $7.748 billion in revenue, led by $6.545 billion in passenger revenue from a rebound in domestic travel. Compared to the second quarter of 2020, amid lockdowns throughout the country, the airline quadrupled its revenue, with $1.622 billion in total revenue. Additionally, American Airlines posted approximately 62.5 percent of second-quarter revenue from 2019.
Meanwhile, American Airlines reported more than $7 billion in expenses, primarily due to $2.9 billion dedicated to salaries, wages and benefits and $1.6 billion from fuel-related costs. Among other items, the airline incurred $635 million in its regional expenses, including a $167 million credit from the U.S. government via the Payroll Support Program. Furthermore, American Airlines reported a $-1.288 billion operating expense as a “special item.” This special item is a credit from the PSP, which helped push the Texas-based carrier “into the black.”
Overall, without the U.S. government’s PSP, the Fort Worth, Tex.-based carrier reported a $1.090 billion loss or $1.69 per share. In comparison to other airlines that received PSP, United Airlines recorded the highest loss with a $1.971 billion loss, while Delta Airlines reported an $881 million loss.
Furthermore, American Airlines ended the second quarter of 2021 with $21.3 billion in available liquidity. With its high liquidity levels, the airline plans to reduce its debt by $15 billion by the end of 2025 via “naturally occurring amortization” – utilizing cash flow and excess cash to eliminate prepayable debt – and using cash instead of debt for aircraft deliveries. Currently, according to FactSet, American Airlines totals $48 billion in debt.
From an operational standpoint, in comparison to the second quarter of 2020, American Airlines carried 44 million passengers and increased its load factor by 34.7 percent, from 42.3 to 77 percent. Additionally, its total passenger revenue per available seat mile – PRASM – and total revenue per available seat mile – RASM – increased by 85 percent and 44.3 percent, respectively. Compared to United and Delta, American Airlines showcased higher PRASM’s than the two carriers for four straight quarters. Meanwhile, its cost per available seat mile – CASM – decreased by 46.4 percent.
In its earnings release, American Airlines’ Chairman and CEO Doug Parker states, “Our team members did a tremendous job to deliver solid results despite a challenging start to our summer. Their extraordinary efforts led to an increase in earnings and record revenue performance, and we thank our team for their expertise and care for our customers. These strong results in the face of near-term adversity, coupled with our ongoing initiatives, give us great confidence in the future of American Airlines.”
In its investor presentation, American Airlines highlighted a full rebound in the domestic leisure markets and short-haul international markets. At its hub in Dallas/Fort Worth, the airline is operating more flights now than pre-pandemic. Additionally, the Fort Worth-based carrier states that its domestic business revenue has increased to 45 percent of its pre-COVID-19 levels, while long-haul international travel is making its initial rebound.
American Airlines expects a further rebound in the third quarter of 2021, with a 15 to 20 percent decrease in total capacity, compared to the third quarter of 2019. Also, the airline forecasts a 20 percent decrease in revenue, but an eight to twelve percent increase in cost per available seat mile – CASM. With the current positive trend, according to a staff memo, American Airlines intends to add 1,350 pilots by the end of 2022.
Other U.S.-based carriers reported a profit during the second quarter of 2021. Legacy carrier Delta Airlines posted its first profit since 2019, with $652 million in net income. Similarly, Southwest Airlines and Alaska Airlines posted profits of $348 million and $397 million, showcasing a steady rebound from 2020.