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Airline earnings: Alaska Air, American fly past estimates, Southwest mixed

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Julie Hyman, Brian Sozzi and Myles Udland break down airline earnings, including: American Airlines beating Q2 earnings due to a surge in the revitalized travel industry, Southwest Airlines reporting a small quarterly loss but remaining optimistic about the rest of the year, and Alaska Airlines beating on the top and bottom-line estimates.

Video Transcript

MYLES UDLAND: Let's talk a little bit about what's going on in the airlines as well. Got three airlines out this morning. Let's begin with what we saw from Southwest. The company coming out in its latest quarter saying that in the month of June, they were making positive cash flow, Sozzi, $4 million a day. And we can see here, topline a little bit better than expected. The adjusted earnings numbers doesn't seem like the Street's worried about it yet.

BRIAN SOZZI: I remain on the leisure/business travel beat, Southwest noting that leisure travel is now back to pre-pandemic levels. That is something that Marriott CEO Tony Capuano told me he is seeing as well inside of his business. What is it not back here-- and I think that's why you continue to see pressure on a lot of these airline stocks and also the J-E-T-S, JETS ETF-- business travel. Business travel is improving week to week, but it is nowhere near back to pre-pandemic levels.

MYLES UDLAND: Julie, certainly for a company like a Southwest, business is going to be maybe a little bit less important and really going to be looking at the comp relative to that pre-pandemic payload. And Southwest talking about revenues being only off about 15% in July. They're expecting them to be only off relative to where they were in 2019.

JULIE HYMAN: You know, guys, when I look at some of the airlines that we've heard from already, UAL most notably, the difference really, when you look at the likes of a Southwest and American, is less certainty about the outlook, whereas we heard from the airlines that have already reported, saying they're going to be returning to profitability. American not quite as sanguine on that front. The company says it's still expecting a pre-tax loss in the current quarter. So that's something that's perhaps of concern.

Southwest, Gary Kelly, the CEO who we're going to speak to later in the show, he said he was hopeful of returning to profitability in the third and first-- fourth quarters. But he didn't say it was definitely happening. So that's one thread that I'm picking up on. Another thread, we're continuing to see delays that are spurred by not having enough people that are working at these companies.

So in the case of American, 31% of its flights were delayed because of-- in June, I should say-- because of crew shortages, because of the weather as well. That's something increasingly to consider. 950 trips were pulled from its schedule in the first half of July because of worker shortages as well. So that's something to consider. And then that happened at Southwest, too. More than 17,000 of its flights delayed through July 15th. That's from Flight Aware Data. And so these elements-- uncertainty, yes, over the macro environment. Also, labor shortages really seeming to weigh on these guys.

MYLES UDLAND: Yeah, and if I can launch my own complaint here with American, I had a flight moved by several hours. Now, granted, the flight is not for a few months, flying out on September 3rd, coming back on September I think the 13th or something like that. But, you know, I had plans. And American sent me an email and said your plans are now two hours earlier. So I get to wake up at quarter to 4:00 in the morning to arrive at Newark Airport.

BRIAN SOZZI: Well, my gripe is here, because clearly, I don't take any vacations, it's the structure of the American Airlines earnings release compared to Southwest. Southwest just does a better job with disclosures. Hat tip to you and Gary Kelly. American Airlines Doug Parker, you have to step up your game, my man.

MYLES UDLAND: You know, we should really-- we should have the formatting Olympics here for investor relations. And, you know, granted, different companies have different priorities when it comes to how they're communicating with the Street and how IR teams think about their job or not. But I would love if there was a standardized form that all companies had to fill in so that you could whip through the earnings release as fast as possible, though, of course, remember, it wasn't too long ago that they didn't just release earnings like this. And it was kind of a find your own treasure event there.

I do want to also note Alaska Airlines out with its results earlier today. Company losing $0.30 on an adjusted basis, $840 million in operating cash flow in the second quarter for Alaska. So all three of those airlines, Alaska, American, and Southwest talking about their cash flow moving into a pot-- into positive territory. American, again, million dollars a day positive cash in second quarter. Southwest, about 4 million a day as of the month of June. And here, just to put a point on it, results from Alaska beating on the top and the bottom line.