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Low Load Factor to Hurt American Airlines (AAL) Q1 Earnings
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Passenger revenues account for bulk of American Airlines’ (AAL - Free Report) top line (91.8% in 2019). However, the same is likely to have depleted, particularly in March, the final month of the first-quarter 2020 earnings season. This, in turn, might have hurt the carrier’s overall quarterly performance, which will be reported on Apr 30.
Passenger revenues are generated by transporting passengers on American Airlines flights apart from those carried on its regional flights. Notably, the company primarily operates in two segments: Mainline and Regional affiliates. Geographically, passenger revenues are generated from domestic operations, besides operations in the Atlantic, Latin America and the Pacific region.
Strong Air-Travel Demand Boosted Q4 Top Line
During the final quarter of 2019, passenger revenues, which accounted for 91.5% of the top line, improved 3.9%, mainly owing to buoyant demand for air travel. Total revenue per available seat miles (TRASM: a key measure of unit revenues) inched up 0.5% to 16.1 cents in the reported quarter. Passenger revenue per available seat miles (PRASM) increased 0.9% to 14.72 cents in the fourth quarter.
While traffic (measured by revenue passenger miles) was up 6%, capacity (measured by average seat miles) expanded 2.9%. Consolidated load factor (percentage of seats filled by passengers) increased 240 basis points to 83.8% as traffic growth outpaced capacity expansion.
Coronavirus to Adversely Impact Passenger Traffic in Q1
Even though passenger traffic is likely to have been strong in January and February, the fact that air-travel demand dwindled in March as coronavirus was declared a pandemic by the World Health Organization during that time, might have weighed on American Airlines’ top line in the to-be-reported quarter.
To mitigate the extremely low-demand scenario as many countries are on lockdown and wide-spread travel restrictions are in place, this Zacks Rank #3 (Hold) carrier is trimming its capacity causing cancellation of multiple flights. With traffic declining at a faster rate than capacity-cuts, load factor is likely to have declined in the first quarter.
Consequently, the Zacks Consensus Estimate for American Airlines’ first-quarter consolidated passenger load factor stands at 80, indicating a 4.8% decline from the figure reported in fourth-quarter 2019. In fact, this key metric is likely to have contracted due to weakness on the international front. As a result, international load factor is expected to have dipped 4.8% sequentially to 79.
The company is likely to have witnessed lower passenger count in the first quarter, down 11.1% from the number reported in fourth-quarter 2019 . Also, the Zacks Consensus Estimate for first-quarter passenger revenue per available seat miles (PRASM: a key measure of unit revenues) stands at 13.53 cents, implying an 8.1% fall from the figure reported sequentially.
Earnings & Revenue Projections
Due to the coronavirus-induced extremely low air-travel demand, the Zacks Consensus Estimate for first-quarter earnings is pegged at a loss of $2.16. Meanwhile, the company reported earnings per share of 52 cents in fourth-quarter 2019. For quarterly sales, the consensus mark is pegged at $9.15 billion, suggesting a 13.6% decrease from the figure reported in the sequential quarter.
Soft Air-Travel Demand: A Bane for Entire Industry
The coronavirus-led weak air travel demand is likely to hurt results of all airline players. Notably, Delta Air Lines (DAL - Free Report) , which kicked off the first-quarter earnings season for the airlines industry on Apr 22, suffered its first quarterly loss since 2010, mainly due to the 18.2% fall in passenger revenues. Other airline stocks like United Airlines (UAL - Free Report) and JetBlue Airways (JBLU - Free Report) are also likely to report waning passenger revenues for the first quarter, when they announce results on Apr 30 and May 7, respectively.
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Low Load Factor to Hurt American Airlines (AAL) Q1 Earnings
Passenger revenues account for bulk of American Airlines’ (AAL - Free Report) top line (91.8% in 2019). However, the same is likely to have depleted, particularly in March, the final month of the first-quarter 2020 earnings season. This, in turn, might have hurt the carrier’s overall quarterly performance, which will be reported on Apr 30.
Passenger revenues are generated by transporting passengers on American Airlines flights apart from those carried on its regional flights. Notably, the company primarily operates in two segments: Mainline and Regional affiliates. Geographically, passenger revenues are generated from domestic operations, besides operations in the Atlantic, Latin America and the Pacific region.
Strong Air-Travel Demand Boosted Q4 Top Line
During the final quarter of 2019, passenger revenues, which accounted for 91.5% of the top line, improved 3.9%, mainly owing to buoyant demand for air travel. Total revenue per available seat miles (TRASM: a key measure of unit revenues) inched up 0.5% to 16.1 cents in the reported quarter. Passenger revenue per available seat miles (PRASM) increased 0.9% to 14.72 cents in the fourth quarter.
While traffic (measured by revenue passenger miles) was up 6%, capacity (measured by average seat miles) expanded 2.9%. Consolidated load factor (percentage of seats filled by passengers) increased 240 basis points to 83.8% as traffic growth outpaced capacity expansion.
Coronavirus to Adversely Impact Passenger Traffic in Q1
Even though passenger traffic is likely to have been strong in January and February, the fact that air-travel demand dwindled in March as coronavirus was declared a pandemic by the World Health Organization during that time, might have weighed on American Airlines’ top line in the to-be-reported quarter.
To mitigate the extremely low-demand scenario as many countries are on lockdown and wide-spread travel restrictions are in place, this Zacks Rank #3 (Hold) carrier is trimming its capacity causing cancellation of multiple flights. With traffic declining at a faster rate than capacity-cuts, load factor is likely to have declined in the first quarter.
Consequently, the Zacks Consensus Estimate for American Airlines’ first-quarter consolidated passenger load factor stands at 80, indicating a 4.8% decline from the figure reported in fourth-quarter 2019. In fact, this key metric is likely to have contracted due to weakness on the international front. As a result, international load factor is expected to have dipped 4.8% sequentially to 79.
The company is likely to have witnessed lower passenger count in the first quarter, down 11.1% from the number reported in fourth-quarter 2019 . Also, the Zacks Consensus Estimate for first-quarter passenger revenue per available seat miles (PRASM: a key measure of unit revenues) stands at 13.53 cents, implying an 8.1% fall from the figure reported sequentially.
Earnings & Revenue Projections
Due to the coronavirus-induced extremely low air-travel demand, the Zacks Consensus Estimate for first-quarter earnings is pegged at a loss of $2.16. Meanwhile, the company reported earnings per share of 52 cents in fourth-quarter 2019. For quarterly sales, the consensus mark is pegged at $9.15 billion, suggesting a 13.6% decrease from the figure reported in the sequential quarter.
Soft Air-Travel Demand: A Bane for Entire Industry
The coronavirus-led weak air travel demand is likely to hurt results of all airline players. Notably, Delta Air Lines (DAL - Free Report) , which kicked off the first-quarter earnings season for the airlines industry on Apr 22, suffered its first quarterly loss since 2010, mainly due to the 18.2% fall in passenger revenues. Other airline stocks like United Airlines (UAL - Free Report) and JetBlue Airways (JBLU - Free Report) are also likely to report waning passenger revenues for the first quarter, when they announce results on Apr 30 and May 7, respectively.
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