U.S. airline giant American Airlines Group (AAL 0.34%)reported third-quarter financial results on Thursday, Oct. 24, that topped analyst consensus estimates. It reported a record $13.6 billion in revenue, up 1.2% year over year, and adjusted earnings per share (EPS) of $0.30 that nearly doubled projections (but fell year over year). The company also posted a net loss of $149 million, primarily due to significant special items like a one-time $354 million labor-related charge. That loss was an improvement year over year.
Overall, the quarter highlighted record revenue, operational achievements, and ongoing cost challenges.
| Financial Metric | Q3 2024 | Analysts Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $13.65 billion | $13.5 billion | $13.45 billion | 1.2% |
| Net income (loss) | ($149 million) | N/A | ($545 million) | N/A |
| Adjusted EPS | $0.30 | $0.16 | $0.38 | (21%) |
| Operating margin | 0.7% | N/A | (1.7%) | 100 bps |
| Load factor | 86.6% | 84.2% | 84.0% | 260 bps |
Source: American Airlines. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Business Overview and Focus Areas
American Airlines is a major player in the airline industry, offering scheduled passenger and cargo air transport globally. It operates a vast network of hubs and routes, crucial for maintaining competitive market presence. The company prioritizes expanding its network and strengthening partnerships, such as those within the Oneworld Alliance, to enhance service and connectivity. The airline focuses on loyalty programs through its AAdvantage program and co-branded credit cards. These initiatives drive customer engagement and generate significant ancillary revenue.
Quarterly Performance
In Q3 2024, American Airlines achieved robust revenue growth despite operational challenges. Total revenue rose to $13.6 billion, with passenger revenue up by 0.8% to $12.5 billion and cargo revenue increasing by 5% to $202 million. This growth was supported by strategic initiatives to revamp its sales strategy and strengthen business travel ties.
Operating expenses decreased by 1.1% to $13.6 billion, driven by reductions in fuel costs and related taxes. However, labor costs rose 3.1% due to new employment agreements, illustrating ongoing cost management challenges. Operational performance demonstrated resilience, with third-quarter load factors reaching 86.6% and maintaining a high completion factor despite disruptions. The company managed a successful recovery from a third-party IT outage and various weather-related disturbances.
American Airlines faced significant impacts from $354 million in special items for labor-related agreements, affecting its operating margin, which was only 0.7% when including these costs. Nevertheless, these agreements improved labor relations and strategic positioning for the future.
Looking Ahead
For Q4 2024, American Airlines projected adjusted EPS between $0.25 and $0.50. It raised its full-year forecast to $1.35 to $1.60 per share, up significantly from prior guidance of $0.70 to $1.30. Management also expects to reduce total debt by $15 billion by 2025, leveraging network enhancements and collaborations to solidify market presence.
The airline plans to expand its schedule and extend its alliance reach to boost route availability. Management also remains focused on driving sustainability through emissions reduction initiatives and continues to refine loyalty offerings to attract and retain customers. Investors should monitor how these strategies align with American Airlines' operational goals and cost structures to gauge future performance prospects.
