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American Airlines (AAL) Posts Narrower-Than-Expected Q3 Loss

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American Airlines’ (AAL - Free Report) third-quarter 2021 loss (excluding $1.24 from non-recurring items) of 99 cents per share compared favorably with the Zacks Consensus Estimate of a loss of $1.04. Quarterly loss per share was also narrower than the year-ago loss of $5.54.

Operating revenues of $8,969 million skyrocketed 182.67% year over year and also surpassed the Zacks Consensus Estimate of $8,926.6 million. This massive year-over-year jump reflects improving air-travel demand. Revenues increased 20% sequentially.

Passenger revenues, which accounted for the bulk of the top line (88.7%), increased to $7,957 million from a mere $2,540 million a year ago when the impact of coronavirus on air-travel demand was much severe. Cargo revenues surged 59.9% to $332 million, driven by the carrier’s focus on its cargo unit in the coronavirus era. Cargo yield per ton mile increased 5.5% in the third quarter of 2021. Other revenues soared 59.8%.

Total revenue per available seat mile (TRASM: a key measure of unit revenues) increased to 14.68 cents from 10.31 cents a year ago. Passenger revenue per available seat miles (PRASM) climbed 57.8% to 13.02 cents in the period. Consolidated yield increased 18.1%.

Reflecting the uptick in air-travel demand, consolidated traffic (measured in revenue passenger miles) rose to 48,069 million in the reported quarter from a mere 18,121 million a year ago. To cater to this buoyant demand, capacity (measured in average seat miles) expanded to 61,111 million from 30,768 million. Consolidated load factor (percentage of seats filled by passengers) increased 19.8 percentage points to 78.7% in the third quarter of 2021.

Total operating costs (on a reported basis) escalated 38.5% to $8,374 million with expenses pertaining to aircraft fuel and related taxes skyrocketing to $1,952 million from $611 million a year ago. Average fuel price per gallon (including related taxes) climbed to $2.07 from $1.23 a year ago as oil prices move north. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) declined 36.7% to 12.24 cents.

American Airlines, currently carrying a Zacks Rank #3 (Hold), exited the quarter with $18 billion of total available liquidity after prepayment of $950 million spare parts term loan during the July-September timeframe. The carrier intends to reduce its debt by $15 billion within 2025-end.

You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Airlines expects system capacity for the December quarter to decline in the 11-13% range from the figure reported in fourth-quarter 2019. Total revenues in the fourth quarter of 2021 are anticipated to decline 20% from the level recorded in fourth-quarter 2019. Fuel cost per gallon in fourth-quarter 2021 is expected in the $2.43-$2.48 band. Fuel gallon consumption is expected to be $970 million. CASM excluding fuel and special items is expected to increase in the 8-10% range in the fourth quarter of 2021 from the number reported in fourth-quarter 2019. Pre-tax margin (excluding net special items) for the December quarter is anticipated between -16% and -18%. American Airlines still expects robust air-travel demand during the peak travel periods in the fourth quarter with more than 6,000 peak day departures.

Sectorial Snapshots

Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) and Kansas City Southern  recently reported third-quarter 2021 results.

Delta reported third-quarter earnings (excluding $1.59 from non-recurring items) of 30 cents per share, outpacing the Zacks Consensus Estimate of 15 cents. Revenues of $9,154 million also beat the Zacks Consensus Estimate of $8,370.6 million.

J.B. Hunt reported third-quarter earnings of $1.88 per share, surpassing the Zacks Consensus Estimate of $1.77. Total operating revenues of $3144.8 million outperformed the Zacks Consensus Estimate of $3002.1 million.

Kansas City Southern reported third-quarter earnings (excluding 31 cents from non-recurring items) of $2.02 per share, missing the Zacks Consensus Estimate of $2.07. Quarterly revenues of $744 million, however, surpassed the Zacks Consensus Estimate of $725.9 million.

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