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American Airlines' (AAL) Q1 Loss Narrower Than Expected

American Airlines’ AAL first-quarter 2021 loss puts it in the same boat of Alaska Air Group ALK, United Airlines UAL and Delta Air Lines DAL as all suffered a similar setback.

The airline incurred a loss (excluding $2.35 from non-recurring items) of $4.32 per share, comparing favorably with the Zacks Consensus Estimate of a loss of $4.35. However, quarterly loss per share was wider than the year-ago loss of $2.65. Moreover, operating revenues of $4,008 million slumped 52.9% year over year and also fell short of the Zacks Consensus Estimate of $4,031 million.

Passenger revenues, which accounted for bulk of the top line (79.3%), plunged 58.6% to $3,179 million. Cargo revenues surged in excess of 100% to $315 million, driven by the carrier’s focus on its cargo unit in the face of dwindling passenger revenues. Cargo yield per ton mile jumped 76% in the first quarter of 2021. Other revenues dropped 25.3%.

Total revenue per available seat mile (TRASM: a key measure of unit revenues) decreased 22.6% year over year to 10.61 cents in the reported quarter on a consolidated basis. Further, passenger revenue per available seat miles (PRASM) fell 31.9% to 8.42 cents in the period. Moreover, consolidated yield was down 16.8%.

While consolidated traffic (measured in revenue passenger miles) plummeted 50.3%, capacity (measured in average seat miles) contracted 39.2%. Consolidated load factor (percentage of seats filled by passengers) decreased 13.2 percentage points to 59.5% as traffic decline was more than the capacity reduction.

Total operating costs (on a reported basis) declined 51.9% year over year to $5,323 million with expenses pertaining to aircraft fuel and related taxes tumbling 42%. However, consolidated operating costs per available seat mile (CASM: excluding fuel and special items) shot up 21.1% to 19.19 cents due to weak capacity. With a portion of the fleet remaining grounded/under-utilized, fuel gallons consumed tanked 37.2%. Average fuel price per gallon (including related taxes) also fell 7.4% to $1.70.

American Airlines Group Inc. Price, Consensus and EPS Surprise

American Airlines Group Inc. Price, Consensus and EPS Surprise
American Airlines Group Inc. Price, Consensus and EPS Surprise

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

Other Details

Driven by its cost-control initiatives, American Airlines, currently carrying a Zacks Rank #3 (Hold), succeeded in reducing its daily cash burn rate from nearly $100 million in April 2020 to approximately $27 million in the March quarter. Also, it exited the first quarter with available liquidity of $17.3 billion. The carrier expects to end the second quarter of 2021 with total available liquidity worth $19.5 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, American Airlines expects system capacity for the March quarter to nosedive in the 20-25% range from the figure reported in second-quarter 2019. Total revenues in the second quarter of 2021 are anticipated to decline 40% from the level recorded in second-quarter 2019. Fuel cost per gallon in second-quarter 2021 is expected in the $1.84-$1.89 band. Fuel gallon consumption is expected to be $873 million. CASM excluding fuel and special items in the June quarter is expected to increase in the 13-17% range from the second-quarter 2019 number. Pre-tax margin (excluding net special items) in the June quarter is anticipated between -27% and -30%.

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