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American Airlines (AAL) Posts Q3 Loss, Suffers Revenue Dip Y/Y

Zacks.com logo Zacks.com 10/22/2020

American Airlines' AAL third-quarter 2020 loss makes it join the club of Alaska Air Group ALK, United Airlines UAL and Delta Air Lines DAL as all suffered the same setback

American Airlines incurred a loss (excluding 83 cents from non-recurring items) of $5.54 per share, comparing favorably with the Zacks Consensus Estimate of a loss of $5.62. However, the company delivered earnings per share of $1.42 in the year-ago quarter. Results in the third quarter were hurt by the coronavirus-induced air-travel demand woes.

Operating revenues of $3,173 million slumped 73.4% year over year but surpassed the Zacks Consensus Estimate of $2,800.8 million. Passenger revenues, which accounted for bulk of the top line (80.1%), plunged 76.9% to $2,540 million as well. Cargo revenues too declined marginally to $207 million, mainly due to 45.8% lower cargo ton miles. Other revenues also dropped 39.9%.

Total revenue per available seat mile (TRASM: a key measure of unit revenues) decreased 34.4% year over year to 10.31 cents in the reported quarter on a consolidated basis. Further, passenger revenue per available seat miles (PRASM) fell 43.1% to 8.25 cents in the period. Moreover, consolidated yield was down 17.3%.

American Airlines Group Inc. Price, Consensus and EPS Surprise

chart, line chart: American Airlines Group Inc. Price, Consensus and EPS Surprise © Provided by Zacks.com American Airlines Group Inc. Price, Consensus and EPS Surprise

American Airlines Group Inc. price-consensus-eps-surprise-chart | American Airlines Group Inc. Quote

 

While consolidated traffic (measured in revenue passenger miles) plummeted 72.1%, capacity (measured in average seat miles) contracted 59.4%. Consolidated load factor (percentage of seats filled by passengers) decreased 26.7 percentage points to 58.9% as traffic decline was more than capacity reduction.

Total operating costs (on a reported basis) declined 45.6% year over year to $6,044 million with expenses pertaining to aircraft fuel and related taxes tumbling 77.2%. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) shot up more than 48% to 21.33 cents due to weak capacity. With major part of the fleet remaining grounded/under-utilized, fuel gallons consumed tanked 58.7%. Average fuel price per gallon (including related taxes) also declined 40.1% to $1.23.

Other Details

Driven by its cost-control initiatives, American Airlines’ average daily cash burn in the September quarter was $44 million per day, comparing favorably with the June-quarter’s figure of $58 million. Also, it exited the third quarter with available liquidity of $13.6 billion. The carrier expects cash burn rate to be approximately in the $25-$30 million range per day for the December quarter.

However, American Airlines expects system capacity for the December quarter to nosedive more than 50% on a year-over-year basis. Long-haul international capacity is estimated to be down approximately 75% year over year in the final quarter of the year.

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