Higher airfares and strong demand for travel pushed American Airlines above pre-pandemic profit levels for the recently finished fourth quarter, the company said Thursday.
Fort Worth-based American Airlines expects to make a profit of $768 to $803 million for the October to December stretch, nearly twice as much as the $414 million it made in the fourth quarter of 2019, the last quarter before the COVID-19 pandemic upended the industry.
It’s the first time American has been able to best pre-pandemic earnings.
American lost $10.9 billion combined for 2020 and 2021, even after accepting $12.8 billion in payroll support grants from the federal government, the most of any carrier.
American reports its fourth-quarter and full 2022 earnings on Jan. 26 but has been giving investors previews a few weeks in advance for the last two years.
American Airlines chief tinancial officer Devon May said Thursday in an interview that the strong earnings are primarily due to “yields,” or the prices that passengers are paying for tickets.
“The yields have stayed really strong, we are running and we continue to run really high load factors, but that’s not that much different than what we would have seen certainly in prior quarters and back in 2019,” May said. “The performance for this quarter, like the last couple of quarters before, it is really on the yield side.”
Total revenue per available seat mile, a key industry measure of how much money every passenger traveling a mile through the air brings in, will be up about 24% compared with 2019 levels, American said.
That tracks with industry analysts who predicted that airfares for the 2022 holiday season would be about 22% higher than they were in 2019.
After a dismal start to 2022 in which it lost $1.6 billion in the first quarter because of a surge in COVID and a pullback in consumer spending, American Airlines is poised to record three straight quarters of profits and make a full-year profit for the first time since 2019.
American was also able to pay down $1.2 billion in debt during the quarter, cutting its debt load by $7.5 billion over the last 18 months.
When asked about looming recession fears, May said the airline isn’t seeing any weakness.
“In the fourth quarter, we saw really strong demand throughout,” May said. “But what we’ve seen so far in the first week or so of 2023 is bookings continue to come in really strong. There’s just a lot of demand for our product.”
While American Airlines is expecting to make a profit for the fourth quarter, Dallas-based Southwest Airlines said technology problems that forced the cancellation of about 16,700 flights in late December will likely swing it to a loss.
On CNBC Thursday morning, American Airlines CEO Robert Isom said the winter storm that swept across the country just before Christmas will factor into earnings, but that the carrier recovered quickly.
“It absolutely had an impact and also we had some benefit from customers coming over to American,” Isom said. “We did a remarkable job of making sure that we set the airline up for recovery. We did that over Christmas day. We were back faster than anybody else in the industry.”
