American Airlines Q4 FY2021 Earnings Report Preview: What to Look For From AAL

Focus on AAL load factor

Key Takeaways

  • Analysts estimate adjusted EPS of -$1.45 vs. -$3.86 in Q4 FY 2020.
  • Load factor is expected to rise YOY.
  • Revenue is expected to more than double amid a rebound in travel demand from last year's pandemic-depressed levels.

American Airlines Group Inc. (AAL) has seen its revenue rebound in recent quarters as the company struggles to recover from the shock to travel demand triggered by the COVID-19 pandemic. But a full recovery may be far away. The airline has continued to report losses as new variants of the coronavirus disrupt the company's recovery. American Airlines' was forced to cancel many flights over the holiday season as flight crews called in sick due to the fast-spreading Omicron variant of the virus.

Investors will be watching how far along American Airlines is on the road to recovery when it reports earnings on Jan. 20, 2022 for Q4 FY 2021. Analysts expect the airline to report its eighth straight adjusted loss per share, but revenue is expected to rise for the third consecutive quarter.

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 carrier's load factor to increase compared to the year-ago quarter as travel rebounds from pandemic-depressed levels.

Shares of American Airlines have underperformed the broader market over the past year. While the stock had been outperforming through mid-November, it then began to sharply lag the market amid mounting fears concerning the spread of the Omicron variant of the coronavirus. As a result, during the 12 months ending Jan. 18, 2022, American Airlines' shares have provided a total return of 12.1%, below the S&P 500's total return of 20.5%.

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

American Airlines Earnings History

American Airlines reported Q3 FY 2021 earnings that beat analyst estimates as revenue just matched expectations. The carrier reported its seventh straight adjusted loss per share, but the loss was more than five times smaller than the adjusted loss per share reported in the year-ago quarter. Revenue expanded at a rapid pace of 182.7% year over year (YOY), marking the second straight quarter of rising revenue after five consecutive quarters of declines. The company noted that the spread of the Delta variant of the coronavirus delayed some of its revenue recovery during the quarter.

In Q2 FY 2021, American Airlines beat consensus estimates on both earnings and revenue. It reported a sixth consecutive adjusted loss per share despite revenue soaring 361.0% YOY, ending the streak of five straight quarters of falling revenue. The company accelerated its deleveraging process by announcing plans to pay down about $15 billion of debt by the end of 2025.

Analysts expect American Airlines to report another adjusted loss per share, making it eight in a row. Revenue is expected to rise at a robust pace of 131.3% YOY, which would be the third straight quarter of rising revenue. However, total revenue would still be below pre-pandemic levels. For full-year FY 2021, analysts expect the company to report an adjusted loss per share of $8.42, which would be a significant improvement from the adjusted loss per share of $19.66 in FY 2020. Annual revenue is expected to rise 71.9%, but total revenue would still be below pre-pandemic levels after sinking 62.1% in the previous year.

American Airlines Key Stats
  Estimate for Q4 FY 2021 Q4 FY 2020 Q4 FY 2019
Adjusted Earnings Per Share ($) -1.45 -3.86 1.15
Revenue ($B) 9.3 4.0 11.3
Load Factor (%) 79.6 64.1 83.8

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 has led to a reduction in air travel, leaving airlines with high fixed costs amid falling load factors and revenues, the combination of which is causing steep losses.

In the three years prior to the pandemic, American Airlines' annual load factor fell within a range between approximately 82%-85%. It declined to 64.1% in FY 2020 amid the pandemic. The company's quarterly load factor hit a low point in Q2 FY 2020, when it reached 42.3%. It then rose throughout the next two quarters, reaching 64.1% in the final quarter of FY 2020. It fell back to 59.5% in the first quarter of FY 2021 before rising to 77.0% in the second quarter and then again in the third quarter to 78.7%. Analysts expect the airline's load factor to increase to 79.6% in Q4 FY 2021. For full-year FY 2021, analysts are expecting an annual load factor of 75.1%. While both the Q4 and annual estimates mark a significant improvement, these load factors remain well below the levels that American Airlines posted before the pandemic.

Article Sources
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  1. CNBC. "Omicron hits airline crews and sparks hundreds of holiday flight cancellations." Accessed Jan. 19, 2022.

  2. American Airlines Group Inc. "American Airlines Group Announces Webcast of Fourth-Quarter and Full-Year 2021 Financial Results." Accessed Jan. 18, 2022.

  3. Visible Alpha. "Financial Data." Accessed Jan. 18, 2022.

  4. American Airlines Group Inc. "American Airlines Reports Third-Quarter 2021 Financial Results." Accessed Jan. 18, 2022.

  5. American Airlines Group Inc. "American Airlines Reports Second-Quarter 2021 Financial Results." Accessed Jan. 18, 2022.

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