American Airlines Posts An Improved Fourth Quarter
American Airlines (NASDAQ:AAL) The fourth quarter results for American Airlines improved, with the group revenue and earnings coming in quite robust. Revenue came in at $10.94 billion for the quarter, 3% above the same quarter, last year, while total revenue for the year came in at $44.5 billion. Travel demand, on the back of strong consumer confidence, has meant that the airline industry, in general, has seen a strong tailwind for the quarter. This tailwind helped American Airlines improve its earnings for the quarter. Earnings rose by 18% for the quarter, with earnings per share coming in at $1.01 for the quarter.
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*Load factor remained below optimum levels, coming in at 82.1% vs 82.8%, from a year ago.
*Revenue per available seat mile (RASM), was up 1.7% for the quarter, and 2.4% yoy.
*CASM ex. Fuel was up only 1.7%, this is mainly due to the cost measures taken up at the airline.
American Airlines’ key problem has been its balance sheet. Concerns about the large amounts of debt held on its balance sheet has been a key issue ailing the airline. The company at the end of the quarter held $7.8 billion in liquidity, while lowering its debt by $760 million for the year. Continuous improvements to the company’s debt position, is vital for the health of the airline going forward, and remains a key metric that is being watched by the market. The company has guided for a capex of $4.7 billion for 2019. We expect that number will come down significantly in the subsequent years as the company receives its aircraft deliveries.
In order to further shore up its profits, the company during the year, added premium economy segments to its mainline service, with 100 out of 124 airlines witnessing upgrades. Introducing premium product segmentation has been a key strategy used by many airlines this year, as airlines look to improve margins and reduce volatility risks associated with oil prices.
Overall, we expect American Airlines to continue posting robust earnings in the forthcoming quarter. This year saw a multitude of improvements, with the introduction of improved aircraft, and improved routes helping margins. Finally we saw continued expansion of value-added segments, and the reduction of debt. This should continue into the coming quarters.
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