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American Airlines Q2 FY2022 Earnings Report Preview: What to Look For

Focus on AAL load factor

Key Takeaways

  • Analysts estimate EPS of $0.77 vs. -$1.69 in Q2 FY 2021.
  • Load factor is expected to rise to pre-pandemic levels.
  • Revenue is expected to rebound significantly and surpass revenue in Q4 2019, just before the pandemic caused a collapse in air travel.

American Airlines Group Inc. (AAL) has experienced a sharp rebound in revenue in recent quarters following a drastic decline early in the COVID-19 pandemic. But the path to recovery has been turbulent and riddled with logistical headaches. Despite the revenue gains, American Airlines has reported nine quarters in a row of net losses and is expected to report a loss for full-year 2022. One problem is that the air carrier is suffering from a pilot shortage plaguing the broader industry, forcing American Airlines to discontinue service to several cities. Add to those woes an American Airlines scheduling glitch ahead of the July 4 weekend that caused pilots to drop thousands of flights overnight, creating chaos at the airline.

Investors will watch for signs that the company is handling these and other recovery-related challenges when American Airlines reports earnings on July 21, 2022 for Q2 FY 2022. Analysts expect the company to report a profit for the first time in 10 quarters as revenue rebounds at a robust pace.

Investors will also be focusing on American Airlines' load factor, a key metric used by air carriers to gauge what percentage of paid-passenger seating capacity is being filled. Analysts expect the company's load factor to improve significantly year-over-year (YOY), returning to pre-pandemic levels for the first time in over two years.

American Airlines shares have dramatically underperformed the broader market in the past year. From July through early November 2021, the stock traded essentially sideways in a broad band. The share price since then has been on a general decline marked by sharp swings. The stock dropped sharply in November, and dipped further in February and March 2022. It staged a short advance to a peak in April. The stock slipped back sharply again, although they it's up somewhat from a low in June. As of July 19, American Airlines stock has provided a 1-year trailing total return of -20.1%, behind the S&P 500's total return of -7.6%.

One Year Total Return for S&P 500 and American Airlines
Source: TradingView.

American Airlines Earnings History

American Airlines' EPS suffered significantly over the last nine quarters due to pandemic-related business slowdowns. The company has posted losses per share each quarter since Q1 FY 2020. The widest losses were -$7.82 a share for Q2 FY 2020. Losses have narrowed since then to -$0.99 a share in Q3 FY 2021. But the airline has so far been unable to achieve quarterly profitability since the pandemic began. Analysts expect this trend to reverse for Q2 FY 2022. Analysts estimate that American will report EPS of $0.77, the first profit in ten quarters. While that's well below quarterly profit levels in FY 2019, this would be an important step in American Airlines' recovery.

American's revenue performance was drastically affected by the pandemic. Revenue dropped YOY for five consecutive quarters beginning in Q1 FY 2020. It reached as low as $1.6 billion in Q2 FY 2020. But revenue has rebounded dramatically since then. It more than quadrupled YOY in Q2 FY 2021, nearly tripled for Q3 FY 2021, and more than doubled in Q4. For Q2 FY 2022, analysts expect revenue to rebound further, rising by 78.4% YOY to $13.3 billion. That number would be well ahead of the $12.0 billion in revenue the company reported in Q2 FY 2019 before the pandemic.

American Airlines Key Stats
  Estimate for Q2 FY 2022 Q2 FY 2021 Q2 FY 2020
Earnings Per Share ($) 0.77 -1.69 -7.82
Revenue ($B) 13.4 7.5 1.6
Load Factor (%) 85.0 77.0 42.3

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be focused on American Airlines' load factor, a key metric indicating the percentage of a carrier's available seats that are filled with paying passengers. A high load factor, as opposed to a low load factor, indicates that a high percentage of seats are occupied by passengers. Because the costs of sending an aircraft into flight are relatively the same whether there are 50 people aboard or 100, airlines have a strong incentive to fill as many seats as possible by selling more tickets. Higher load factors mean an airline's fixed costs are spread across a greater number of passengers, making the airline more profitable. The pandemic led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which caused steep losses. As restrictions have lifted and passenger demand has increased, load factor has risen as well.

Prior to the pandemic, in FY 2017, FY 2018, and FY 2019, American's annual load factor ranged from 81.9% to 84.6%. It dropped sharply beginning in Q1 FY 2020, reaching a low of 42.3% in Q2 of that year. Load factor has gradually improved since that time, but has not fully recovered. American Airlines' load factor reached 77.0% in Q2 FY 2021 and a recent high of 80.2% in Q4, but it has yet to reach pre-pandemic levels. Now, analysts expect American Airlines to achieve a new milestone in Q2 FY 2022. They estimate that the air carrier's load factor will rise to 85.0%, which is comparable to the levels before the crisis caused by COVID-19. The company is expected to report a full-year 2022 load factor of 82.1%, its highest level since 2019.

Article Sources
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  1. Visible Alpha. "Financial Data."

  2. NBC News. "American Airlines cites pilot shortage in decision to stop flying to 4 airports."

  3. CNBC. "American Airlines scheduling glitch allows pilots to drop thousands of July flights."

  4. American Airlines Group Inc. "Q2 2022 American Airlines Group Inc Earnings Conference Call."

  5. Visible Alpha. "Financial Data."

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