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American Airlines (AAL) Q4 Earnings In Line, Increase Y/Y

Zacks Equity Research

American Airlines’ AAL fourth-quarter 2019 earnings (excluding 20 cents from non-recurring items) of $1.15 per share matched the Zacks Consensus Estimate. However, the bottom line improved 10.6% on a year-over-year basis, backed by low fuel costs.

Operating revenues of $11,313 million increased 3.4% year over year and also marginally beat the Zacks Consensus Estimate of $11,308.3 million. Higher passenger revenues drove the top line.

Passenger revenues, which accounted for bulk of the top line (91.5%), increased 3.9% owing to strong demand for air travel. But cargo revenues declined 18.3% to $216 million, mainly due to a 15.6% reduction in cargo ton miles. Other revenues increased 5.4%.

Total revenue per available seat miles (TRASM: a key measure of unit revenues) inched up 0.5% to 16.1 cents in the reported quarter. Passenger revenue per available seat miles (PRASM) increased 0.9% to 14.72 cents in the fourth quarter. However, consolidated yield dipped 2%.

While traffic (measured by revenue passenger miles) was up 6%, capacity (measured by average seat miles) expanded 2.9%. Consolidated load factor (percentage of seats filled by passengers) increased 240 basis points to 83.8% as traffic growth outpaced capacity expansion.

Total operating costs (on a reported basis) were up 2.1% year over year to $10,584 million with expenses pertaining to salaries, wages and benefits rising 3%. Consolidated operating costs per available seat miles (CASM: excluding fuel and special items) increased 2% to 11.59 cents. However, CASM (including fuel and special items) declined 0.8%  Average fuel cost per gallon (on a consolidated basis: including taxes) declined 8.7% to $2.05.

American Airlines currently has 24 Boeing 737 MAX jets in its fleet, which are grounded since March 2019. Notably, American Airlines canceled roughly 10,000 flights in the final quarter of 2019. The carrier currently expects its Boeing 737 MAX jets to be grounded through Jun 3, 2020.

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

American Airlines rewarded its shareholders to the tune of $329 million in the reported quarter through buybacks ($285 million) and dividends ($44 million). Furthermore, the carrier declared a dividend of 10 cents per share. The amount will be paid out on Feb 19,2020 to the shareholders of record on Feb 5. Notably, the carrier $1.3 billion to its shareholders through dividends and share repurchases in 2019.

Outlook

For the first quarter of 2020, TRASM is expected to be either flat or increase up to 2% on a year-over-year basis. Pre-tax margin excluding special items is projected in the range of 2-4%. Additionally, fuel costs are estimated between $2.00 and $2.05 per gallon in the ongoing quarter. The company predicts first-quarter costs per available seat miles (excluding fuel and special items) to increase in the 2-4% band. Capacity is expected to grow approximately 2.5% in the March-end quarter.

For 2020, capacity is expected to expand in the range of 4-5%. American Airlines, currently carrying a Zacks Rank #3 (Hold), expects 2020 earnings per share between $4 and $6. The mid-point of the guided range ($5 per share) is below the Zacks Consensus Estimate of $5.04. Moreover, the carrier anticipates to generate approximately $6 billion of free cash flow between 2020 and 2021.

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

Upcoming Releases

Investors interested in the Zacks Airline industry are keenly awaiting fourth-quarter 2019 earnings reports from key players like Alaska Air Group ALK, SkyWest SKYW  and GOL Linhas GOL. While Alaska Air is scheduled to report fourth-quarter results on Jan 28, SkyWest and GOL Linhas will do so on Jan 30 and Feb 20, respectively.

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