American, United see double-digit cargo revenue drop

U.S. carriers American Airlines and United Airlines each announced disappointing cargo revenues for the second quarter of 2023, despite seeing monumental growth in the passenger sector. [caption id="attachment_57137236" align="alignright" width="300"] (Photo/American Airlines)[/caption] Freight demand continues to be soft while shippers contend with high capacity, analysts have said. American posted record Q2 revenue of $14.1 billion, a 4.7% increase year over year, and the highest quarterly revenue in the company’s history, American Chief Executive Robert Isom said in the Thursday earnings call. However, American’s Q2 cargo revenue was down 39.8% YoY to $197 million. In the first half of the year, cargo revenue was $420 million, down 39.2% from H1 2022. American Airlines did not respond to requests for comment regarding its cargo operations. United also posted a record Q2, with total operating revenue of $14.2 billion, up 17.1% YoY. However, like American and Delta Air Lines , which released its earnings last week , cargo was down significantly. United cargo revenue for Q2 was $362 million, down 36.9% YoY, and $760 million for H1, down 36.7% YoY. “Cargo revenues have normalized post-pandemic,” United Chief Commercial Officer Andrew Nocella said in the company’s earnings call today. “Yields are down 38% versus 2022 but do remain up 29% versus 2019. We expect yields in the third quarter to be consistent with Q2. Healthy cargo revenues and yields are helping to drive incremental profitability to our global long-haul clients.” AA credit ratings upgraded American Airlines touted its young fleet in its earnings call, explaining that newer planes will require less maintenance. “Our young and simplified fleet differentiates American from our U.S. network peers and provides network flexibility, enhanced efficiency and improved customer experience,” Chief Financial Officer Devon May said in the call. “These benefits are the result of the re-fleeting we pursued from 2014 to 2019 and accelerated during the pandemic. We are pleased we built our fleet in a low-interest rate environment, and at a time when the supply chain wasn’t as challenging as it is today.” American will take delivery of 23 new mainline aircraft in 2023, all of which are financed, May said; 13 have already been delivered. This quarter, the carrier also entered into agreements to purchase seven new Embraer 175 planes and seven used Bombardier CRJ-900 planes. Credit ratings provider Fitch Ratings upgraded American’s issuer default ratings to B+ from B-, with a stable rating outlook. Fitch also upgraded American’s senior secured debt to BB-/RR3 from B/RR3 and unsecured debt to B-/RR6 from CCC/RR6. “American has reduced its total adjusted debt balance by more than $5 billion as of March 31 compared to peak levels,” Fitch said in a statement Wednesday. “Pension liabilities are also down significantly. Fitch expects American to end 2023 with adjusted leverage ratio in the mid- to high 4x range, trending towards the mid 3x range over the next two to three years. Performance in line with expectations could support positive rating momentum in the future.” American executives said they expect a successful Q3 but did not address cargo expectations. The company’s forecasts include the estimated impact of anticipated new labor agreements. “We’re going to match the wages that United is proposing,” Isom said. United is reportedly offering a minimum 2% pay increase. American Airlines ( NASDAQ: AAL ) stock slipped following the company’s earnings call. The carrier ended the day at $17.44 per share, a 6.24% drop from market open. United Q2 strong despite cancellations United executives expect revenue to remain strong throughout the year, due largely to passenger travel demand. However, it has experienced hiccups in its passenger and belly cargo travel recently. “The United team persevered through an unprecedented series of events at the end of last month,” Chief Executive Scott Kirby said in a release, specifically mentioning the Newark airport. United experienced mass cancellations and delays at Newark Liberty International Airport (EWR) in the final week of June due to severe thunderstorms and air traffic control limitations, according to the carrier. “The severe weather at the end of June, which drove multiple consecutive days of strained operation, did lead to a 1-point reduction in capacity for the quarter,” United Chief Financial Officer Gerald Laderman said in the earnings call. “We also incurred incremental disruption-related costs.” The carrier is also growing its fleet. “We took delivery of 20 Boeing 737 MAX aircraft in the second quarter and paid for 10 of those aircraft with cash,” Laderman said. “We expect to take delivery of 28 [Boeing] 737 Max aircraft in third quarter and also look forward to [receiving] our first Airbus A321neo later this fall.” United Airlines ( NASDAQ: UAL ) stock rose slightly following the company’s earnings call. The carrier ended the day at $56.57 per share, up 3.23% from the market open. Join Air Cargo Next for the second Air Cargo Tech Summit on Monday, Sept. 18, and Tuesday, Sept. 19, at the Brussels Marriott Hotel Grand Place in Belgium. For more information on the summit and to register, click here .

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