American Airlines reported total revenue of $14.1 billion in its second quarter, the highest quarterly revenue in the airline’s history, as international travel demand spiked this year.
That’s a 4.7% increase year-over-year for the Fort Worth-based airline. Passenger revenues accumulated from air transportation accounted for $13 billion, $197 million in cargo revenue and $880 million in other revenues that include the AAdvantage affinity car program, produced the record quarter.
The carrier also drove in a $1.3 billion profit in the second quarter, factoring in airfare sales for the summer.
“At American, we’re focused on taking care of what we can control,” said Robert Isom, American Airlines CEO to investors on Thursday. “Our purposeful approach to planning along with our investments in our team, fleet and technology has set us up for success during the busy summer travel season and beyond.”
This week, American went back to the bargaining table with the Allied Pilots Association, the union which represents American’s 15,000 pilots, after United Airlines landed a deal with its pilots that proposed greater pay rates. The union was prepared to open voting on its current tentative agreement to members on July 24, but it will adjust based on procedure and input from its board.
“We’re working through the numbers right now,” said Devon May, American’s chief financial officer. “The wages are close, but a couple percent higher than what we have in our tentative agreement.”
There’s at least a 2% pay decrease compared to Delta Air Lines and United’s pilot contracts, according to the Allied Pilots Association, noting that American did not provide back pay for the months of January, February, March and April 2023 in the current tentative agreement. The American agreement also provides pay increases every May, while United and Delta’s raises are every January.
Under the new deal, airfares could go up at American, but that’s the same story with every major airline readying for new pilot contracts with similar wage increases. Under its current tentative agreement, pilots would receive a 21% pay raise for this year on top of back-dated raises going back to 2020 and more increases in years to come.
“Ultimately, it will take more revenue to pay for higher costs,” Isom said.
The new updates to the pilot contract are not material concerns, according to Joe Rohlena, senior director at Fitch Ratings.
“There is a catch up to the the United contracts, but I don’t think the incremental amount is unmanageable,” Rohlena said.
Similarly, the dismantling of the Northeast Alliance with JetBlue Airways is another tem to watch. Ticket sales for new codeshare flights with JetBlue Airways will no longer be available for purchase beginning July 21, following the federal government’s strike down a long-term partnership.
“Overall, big picture, we’re not overly concerned about it because even though New York is an important market, it’s not an overly large part of American’s network,” Rohlena said.
Domestic unit revenue was down 1.9%, according to May, while international unit revenue was 18.3% year over year. This summer was a record year for international travel as passengers flocked to destinations that eased up on pandemic restrictions.
American and its regional partners operated almost 500,000 flights in the second quarter. For Memorial Day weekend, the carrier delivered a record-high mainline completion factor, or the number of flights that eventually got to their scheduled destinations, that continued into the summer. The carrier also saw record revenue for the Fourth of July holiday period, May said.
“The summer is well underway, and the American Airlines team is firing on all cylinders,” Isom told investors.
