American Airlines Q2 Earnings: Unit Revenues Come In Positive Third Time Consecutively
American Airlines (NASDAQ:AAL) reported a solid quarter this time around, with earnings and revenues beating the consensus estimates comfortably. Despite this, earnings came in lower year-over-year on heavier double-digit increases in fuel and labor costs. That said, the company managed to increase unit revenues for the third time in a row. Like its competitors, American is enjoying the benefits of strong demand that has enabled increased average fares and fees. Going forward, the company expects to see a modest increase of about 0.5-2.5% in unit revenues in Q3 on competitive pricing actions.
Key Takeaways:
- The company continued its aggressive fleet modernization program – slated to be the most aggressive in aviation history. In the quarter, American undertook the delivery of 20 new aircraft in an attempt to replace older aircraft in the fleet. Additionally, the airline greatly expanded its Basic Economy and Premium Economy products, thereby allowing more choice to its customers. Further, the company has decided to introduce new technologies, like proactive bag notification and auto re-accommodation tools, that are poised to make it even easier for customers to fly the airline.
- In the second quarter, the company witnessed a 9.6% rise in CASM. Excluding fuel and certain special items, the figure jump in CASM comes to about 6.8%, driven primarily by heavier wage and benefit increases and aircraft related depreciation expense. That said, the company hopes to see the rate of CASM growth decelerate over the remainder of the year. In this respect, management expects ex-fuel CASM to be up by only about 4.5% in Q3, while consolidated CASM in Q4 is expected to come in around 3%.
- The company continues to see good increase in its PRASM. In the quarter, domestically, American saw a 5.7% increase in the key metric, on the back of double digit growth seen at Philadelphia and Miami. Internationally, the Latin American market continues to see improved PRASM figures, with the Q2 PRASM figure coming in at a mammoth 15%. Continued revenue management and sales initiatives implemented across the sectors will ensure that overall PRASM sees good growth over the remainder of the year.
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