American’s cargo revenue falls 34% in 2023

American Airlines Group reported a record $52.8 billion in operating revenue for 2023, an increase of 7.8% year over year, but saw cargo revenue fall 34.1% YoY to $812 million. [caption id="attachment_57133559" align="alignright" width="300"] (Photo/Al Drago/Bloomberg)[/caption] THE BIG PICTURE: While American’s YoY revenue growth percentage was less than competitors Delta Air Lines at 15% and United Airlines at 19.5%, its YoY cargo revenue loss percentage was similar. High capacity and decreased demand continue to drive this. Despite depressed cargo figures throughout 2023, many analysts are cautiously optimistic that cargo operations and revenue will begin to recover in 2024, especially as Houthi rebel attacks on vessels in the Red Sea continue, sending forwarders to airfreight. BY THE NUMBERS: American today reported $13.1 billion in operating revenue for the fourth quarter, down 1% YoY. In Q4: Cargo revenue was $199 million, down 24.2% YoY; The company’s net income was $19 million, or $0.03 per diluted share; EBIT was $32 million, down 96.8% YoY; American flew 501 million cargo ton miles, up 9.5% YoY; and Cargo yield per ton mile was $39.74, down 30.8% YoY. For full-year 2023: Net income was $822 million, or $1.21 per diluted share; EBIT was $1.1 billion, up 502.7% YoY; American flew 1.8 billion cargo ton miles, down 6.7% YoY; and Cargo yield per ton mile was $44.13, down 29.4% YoY. STATE OF PLAY: American’s 2024 aircraft CapEx is expected to be about $2.3 billion and 2024 non-aircraft CapEx about $850 million. “We have modest aircraft CapEx requirements this decade due to the fleet investments we made over the past decade,” American Airlines Chief Financial Officer Devon May said in today’s earnings call. “Due to the young age of our fleet, we have very modest aircraft replacement needs. As a result, we expect aircraft CapEx to average less than $3.5 billion per year from 2025 through 2030.” American took delivery of 23 new mainline aircraft in 2023 and expects to take delivery of 28 more this year, May said. American is expecting to take delivery of aircraft from beleaguered Boeing , and American executives said they remain confident in the planemaker and their orders. “Some of Boeing’s current issues are all around the Max 9 and the 737-900s; American Airlines does not fly those aircraft,” Chief Executive Robert Isom said in the call. “We’re a huge Boeing customer though and ... we’re going to hold them accountable. Boeing needs to get their act together. The issues that they’ve been dealing with over the recent period of time, but also going back a number of years now, are unacceptable.” FLASHBACK: American Airlines ranked 29th on Air Cargo Next ’s Freight 50 list of the top air cargo carriers in the world. NOTEWORTHY: American reduced total debt by more than $500 million in Q4 and by about $3.2 billion for the year, according to today’s earnings report. The company is more than 75% of the way to its goal of reducing total debt by $15 billion by the end of 2025. As of Dec. 31, American had reduced its total debt by approximately $11.4 billion from peak levels in mid-2021, the report stated. FUTURE LOOK: Based on present demand trends and the fuel price forecast, and excluding the impact of special items, the company expects its Q1 2024 adjusted loss per diluted share to be between $0.15 and $0.35, the report stated. American expects its full-year 2024 adjusted earnings per diluted share to be between $2.25 and $3.25. “Our current forecast for the first quarter assumes a fuel price of between $2.65 and $2.85 per gallon,” May said. “Based on our current demand assumptions and fuel price forecast, we expect to produce an adjusted operating margin of between 0% and 2% in the first quarter.” THE BOTTOM LINE: “We’ve restored the airline to profitability,” Isom said. “We produced record free-cash flow last year. We’ve got another year of really making sure that we continue the progress. It’s a year that we're still recovering from the pandemic, and we’re going to have to see how demand and capacity all shakes out. But ... we expect demand to be very strong.” MARKET REACTION: Shares of American Airlines Group ( NASDAQ: AAL ) were up 10.37% from market open to $15.36 as of market close today. The company has a market capitalization of $10.04 billion.

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