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| American Airlines Earnings Results | |||
|---|---|---|---|
| Metric | Beat/Miss/Match | Reported Value | Analysts’ Prediction |
| Adjusted EPS | Miss | -$4.32 | -$4.26 |
| Revenue (billions) | Miss | $4.0 | $4.1 |
| Load factor | Miss | 59.5% | 63.5% |
Source: Estimates based on analysts’ consensus from Visible Alpha
Key Takeaways
- American Airlines’ load factor came in far below analyst predictions, a sign of the air carrier’s long road to recovery amid the pandemic.
- The company said it’s still burning cash, but at a lower rate than the previous quarter.
- Adjusted EPS and revenue both missed analyst expectations, though revenue missed by a small margin.
American Airlines (AAL) Financial Results: Analysis
American Airlines Group Inc. (AAL) reported Q1 FY 2021 earnings that missed analyst predictions on several fronts. The airline posted adjusted losses per share $0.06 worse than consensus estimates. American Airlines’ adjusted EPS number represents a significant widening of losses compared with adjusted losses per share of -$2.65 for Q1 FY 2020. Revenue came in slightly below analyst predictions at $4.0 billion for the quarter and was down by more than half year-over-year (YOY), a stark reflection of the lingering impact of the COVID-19 pandemic on the airline’s business. The company gave no specific forward guidance for EPS in Q2 or the full year.
American Airlines Key Metric
American Airlines posted far worse-than-expected passenger load factor, a key measure of airline efficiency that shows the percentage of American Airlines’ seating capacity that is being used. Investors look to load factor as a sign of an airline’s profitability. The higher the load factor, the greater the percentage of available seats that are filled on American Airlines’ flights. Given that the costs of flying planes are relatively fixed, with a greater number of passengers aboard those flights and thus a higher load factor, American Airlines can better distribute those costs.
Plunging Load Factor
During the COVID-19 pandemic, would-be travelers around the world have opted to stay home due to health concerns, government regulations, and a cultural shift toward working remotely from home. This has heavily impacted American Airlines’ load factor, which dropped significantly to a low of 42.3% in Q2 FY 2020 before partially recovering in Q3 and Q4. Analysts predicted that this recovery trend would reverse for Q1 on a sequential basis, with load factor dropping slightly from 64.1% in Q4 FY 2020. Instead, the decline was far worse than estimated. American Airlines’ Q1 FY 2021 load factor was 59.5%, down from 72.7% in the same quarter a year earlier.
Signs of Optimism
Chief Executive Officer (CEO) Doug Parker said that the company sees continued recovery in demand going forward. The company raised $10 billion through a debt offering and used a portion of the proceeds to prepay in full a secured loan from the Treasury Department. It also anticipates improving its total available liquidity to about $19.5 billion in Q2.
American Airlines shares climbed by more than to 3% immediately following the earnings announcement. The company has posted a 1-year trailing total return of 104.6%, well above the S&P 500’s total return of 49.1%
Check back later for coverage of the key points of American Airlines’ earnings call.
