We have already seen how European Airlines British Airways, TUI, and easyJet have performed in their financial results released recently. However, how are the airlines faring on the other side of the pond? North America has also had its fair share of problems during the pandemic. In addition, the post-pandemic recovery was also difficult with mass delays and cancelations due to the inability of airlines and airports to meet the surge in demand due to staff shortages. As we know American Airlines was also one of the recipients of financial aid from the US government. However, it does appear that like British Airways’ parent company IAG, American Airlines has returned to profitability in the second quarter of its financial year.
American Airlines’ Financial Performance
In the first quarter of its financial year the airline made a loss of 1.6 billion US Dollars. In the second quarter it made a profit of 476 million US dollars. This is a significant improvement in profitability from a billion dollar plus loss to a multi-million dollar profit and is a tremendous achievement for the company.
In addition, it appears that American Airlines is doing better than it was at the same time in pre-pandemic 2019. The revenue (the total money received by American Airlines) for this quarter was 13.4 billion dollars which is 12.2% higher than for the same quarter in 2019. This shows that the company is at the moment exceeding even its pre-pandemic performance in terms of the money coming in. In addition, there is further potential for growth as the information released also suggests that the passenger volumes flown were 8.5% less than at the same time in pre-pandemic 2019. This means that the company is also able to charge higher prices than before.
It does however appear that the actual profit made by American Airlines at this time in 2019 was 662 million US dollars when compared to 476 million US dollars for this year’s second quarter. This shows that the profit made in the second quarter of 2019 was 39% more than what was made in the second quarter of this year. This indicates that there were higher expenses now when compared to the pre-pandemic second quarter of 2019. The report provided with the financial information cites a challenging operating environment. This would possibly have increased expenses.
In addition, it does appear that expenses which it classifies as non-operating expenses such as interest on loans is also higher now. Total non-operating expenses for the second quarter of 2019 totalled 271 million US dollars when compared to 414 million US Dollars for the same period this year. As one can see loan payments are also impacting on profit.
Good News On the Whole
On the whole, however, the financial data released is good news for American Airlines. The company has talked about how the demand for domestic leisure travel remains very strong and has surpassed the levels reached in the second quarter of 2019. In addition, there has been an improvement in government and corporate revenue (income from customers using American Airlines for government work as well as customers using the airline working for private businesses).
American Airlines also has formulated a plan to pay of 15 billion US dollars of debt by 2025. The fact that it has formed a plan in this way is good news for the company because it shows that it is taking responsibility for controlling the total debt held by the company.
As one can see the overall news for American Airlines is very good this quarter. It has returned to profit and there are signs that the performance of the company has exceeded pre-pandemic levels. In addition, it appears that the company is taking responsibility for controlling its debt. This improved performance as well as responsible financial management indicates that the situation is likely to improve further. We have to wait to see how this progresses.
