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Table of Contents

American Airlines Q1 FY2022 Earnings Report Preview: What to Look For

Focus on AAL load factor

Key Takeaways

  • Analysts estimate adjusted EPS of -$2.42 vs. -$4.32 in Q1 FY 2021.
  • Load factor is expected to rise considerably YOY.
  • Revenue is expected to more than double as travel demand rebounds from last year's levels, which were negatively impacted by the pandemic.

American Airlines Group Inc. (AAL) has seen its revenue rebound in recent quarters after suffering throughout the COVID-19 pandemic, when travel plunged. But despite the rapid recovery in air travel, the company is still losing money and now is facing new operational challenges after laying off much of its staff early in the pandemic. American Airlines is rushing to bolster its ranks of pilots, flight attendants, and mechanics in an effort to limit flight interruptions and delays.

Investors will watch for signs that the company is managing recovering from the pandemic successfully when American Airlines reports earnings on April 21, 2022 for Q1 2022. Analysts predict that the airline will report a ninth straight quarter of adjusted losses per share, but revenue is predicted to rise for the fourth 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 company's load factor to improve significantly on a year-over-year (YOY) basis, but to remain below pre-pandemic levels.

American Airlines shares have underperformed the broader market in the past year. Shares briefly spiked around the beginning of June 2021, but fell through mid-July and traded sideways for several months. They then made a sharp decline in November 2021, again traded sideways for several months, and fell sharply again starting in early March 2022. Although the shares have recovered somewhat in recent weeks, they are still far behind the S&P 500. As of April 17, shares of American Airlines stock have provided a 1-year trailing total return of -15.1%, well behind the S&P 500's return of 6.5%.

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

American Airlines Earnings History

American Airlines has reported adjusted losses per share each quarter since Q1 FY 2020. Prior to that quarter, the company had not posted losses per share on a quarterly basis for at least the previous seven quarters. The most recent three quarterly periods, beginning with Q2 FY 2021, have seen the smallest adjusted losses per share since the start of the pandemic. The narrowest loss per share was in Q3 FY 2021, at -$0.99. Analysts now estimate that American Airlines will report adjusted losses per share of -$2.42 for Q1 FY 2022. This loss is dramatically bigger than the previous three sequential quarters, but it represents a significant improvement on a YOY basis. Adjusted losses per share were -$4.32 for Q1 FY 2021.

American Airlines' revenue has also improved in recent quarters, and at a significant pace. The company posted five consecutive quarters of YOY declines in revenue starting in Q1 FY 2021. Beginning in Q2 FY 2021, however, this trend reversed. Revenue more than doubled YOY in each of the last three quarters of FY 2021, though was is off of a low base in FY 2020 when revenue reached its lowest levels during the pandemic. The recent rebound is illustrated by the 134.1% increase in revenue to $9.4 billion in Q4 FY 2021. For Q1 FY 2022, analysts predict the pace of recovery will continue, albeit at a somewhat slower pace, as American posts revenue gains of 118.7% YOY. Even with these gains, American Airlines' revenue levels are likely to remain well below those that the company posted before the pandemic.

American Airlines Key Stats
  Estimate for Q1 FY 2022 Q1 FY 2021 Q1 FY 2020
Adjusted Earnings Per Share ($) -2.42 -4.32 -2.65
Revenue ($B) 8.8 4.0 8.5
Load Factor (%) 79.0 59.5 72.7

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.

American Airlines' load factor has been significantly impacted by the pandemic. After steadily hovering in the mid-80s throughout most of FY 2018 and FY 2019, it dipped to 72.7% in Q1 FY 2020 and then plunged to 42.3% in Q2 FY 2020. Load factor has improved in subsequent quarters, rising to 77.0%, 78.7% and 80.2% in the second, third and fourth quarters of FY 2021. For Q1 FY 2022, analysts expect American Airlines to report a load factor of 79.0%. This is a significant improvement on a YOY basis but a slight decrease on a sequential basis. While American Airlines' load factor overall has staged a marked recovery, it remains well below the 84.6% load factor for all of 2019, the last full year before the pandemic.

Article Sources
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  1. CNBC. "American Airlines’ new CEO vows reliability as massive peak travel season kicks off."

  2. American Airlines Group Inc. "Q1 2022 American Airlines Group Inc Earnings Conference Call."

  3. Visible Alpha. "Financial Data."

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