American Airlines cargo revenue falls 30.9% YoY

American Airlines today reported record third-quarter revenue of $13.5 billion, surpassing Q3 2022 revenue by 0.1%. Cargo revenue did not fare as well, dropping 30.9% year over year to $193 million. [caption id="attachment_95375" align="alignright" width="300"] (Photo/American Airlines)[/caption] THE BIG PICTURE: American’s earnings are in line with those reported by major carriers throughout 2023, including the Q3 earnings recently reported by Delta Air Lines and United Airlines . While overall revenue is up, cargo revenue is down due to high capacity and low demand. BY THE NUMBERS: Q3 cargo operations were down significantly compared with Q3 2022. In Q3: Cargo tonne miles were 490 million, up 2.5% YoY; Cargo yield per tonne mile was $39.31, down 32.6% YoY; Net income was $263 million, down 24.1% YoY; and Earnings per common share was 40 cents, down 45% YoY. For the first nine months of 2023, American’s revenue was $39.7 billion, up 11% YoY. Additionally: Cargo revenue was $613 million, down 36.8%; Cargo tonne miles were 1.3 billion, down 11.6% YoY; and Cargo yield per tonne mile was $45.78, down 28.6% YoY. WHAT THEY’RE SAYING: The Q3 revenue of $13.5 billion led to an adjusted operating income of nearly $730 million and an adjusted operating margin of 5.4%, American Airlines Chief Financial Officer Devon May said in today’s earnings call. “Revenue for the quarter was in line with what we had shared in July, and unit revenue was down 6.3% versus a historically strong 2022 unit cost excluding net special items,” May said. “Fuel was up 3.3% YoY, nearly a point better than the low end of our prior guidance range. This outcome was driven by higher capacity and some expenses that were pushed to the fourth quarter.” STATE OF PLAY: Increased fuel prices impacted the carrier’s bottom line. “During the third quarter, the average price of jet fuel increased sharply,” May said. “While the rapid increase in fuel prices resulted in lower earnings in the quarter, we continue to stay focused on our priorities.” The carrier has made significant fleet investments in the past decade, taking delivery of 17 mainline aircraft year-to-date. It expects to receive four more by yearend. “All of our 2023 deliveries have been financed,” May said. “Given the continuous supply chain challenges the OEMs [original equipment manufacturers] are managing, we have been in the used market for younger vintage narrowbody aircraft. We have signed an agreement with Alaska Airlines to purchase 10 Airbus A321neo aircraft that we expect to join the fleet in the fourth quarter of this year and the first quarter of 2024.” American Airlines Chief Executive Robert Isom said on the earnings call, “Our simplified fleet remains the youngest and most efficient among the U.S. network carriers, and we are working to increase the utilization of both our mainline and regional aircraft.” FLASHBACK: Fitch Ratings , Moody’s Investors Service and S&P Global Ratings upgraded American’s credit ratings in Q2 and Q3. Fitch upgraded the issuer default ratings for American Airlines to B+ from B-, with a stable outlook. Moody’s upgraded American’s corporate family rating to B1 from B2, probability of default rating to B1-PD from B2-PD, senior secured to Ba2 from Ba3 and senior unsecured to B3 from Caa1. S&P revised American’s outlook to positive from stable. NOTEWORTHY: American Airlines pilots, represented by the Allied Pilots Association , ratified a new four-year agreement with the carrier in August. The contract delivers more than $9 billion in compensation and benefits to American’s 15,000 pilots, according to the carrier. THE BOTTOM LINE: “American ended the quarter with the best completion factor of the U.S. network carriers while maintaining our first-place standing and on-time departures through the first nine months of the year,” Isom said. “No network airline is operating more reliably than American over the past 15 months.” MARKET REACTION: Shares of American Airlines ( NASDAQ: AAL ) were up 0.79% from market open to $11.45 as of market close today. American has a market capitalization of $7.6 billion.

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