Key Takeaways

  • American Airlines' load factor beat analyst expectations as travel demand recovers from the COVID-19 pandemic.
  • Load factor measures the percentage of seating capacity being filled by paying passengers. It fell sharply last year amid the pandemic and related travel restrictions.
  • The Delta variant of the coronavirus poses a risk to the recovery in travel demand for airlines.
American Airlines Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Beat -$1.69 -$2.06
Revenue Beat $7.5B $7.3B 
Load Factor Beat 77.0% 74.4% 

Source: Predictions based on analysts' consensus from Visible Alpha

American Airlines (AAL) Financial Results: Analysis

American Airlines Group Inc. (AAL) reported Q2 FY 2021 earnings that beat analysts' expectations. The company reported an adjusted loss per share that was narrower than expected. It was the sixth straight quarter of losses, but the loss was the smallest as travel demand begins to recover from the COVID-19 shock.

Revenue surpassed forecasts, rising 361.0% from the year-ago quarter's pandemic-depressed low. However, it is still well below the revenue the company was generating before the pandemic. The airline's load factor also came in above expectations. The company's shares were down nearly 1% in pre-market trading. Over the past year, American Airlines' shares have provided a total return of 86.6%, well above the S&P 500's total return of 33.8%.

AAL Load Factor

American Airlines reported a load factor of 77.0% in the second quarter, well above the year-ago quarter's 42.3%, which represented the low point from the pandemic shock. Load factor is a key metric used in the airline industry to indicate the percentage of a carrier's available seats that are filled with paying 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 that an airline's fixed costs are spread across a greater number of passengers, making the airline more profitable.

In FY 2019, prior to the pandemic, American Airlines' load factor in each quarter ranged between 82% and 87%. This quarter's load factor is the closest the airline has been to attaining that level again since the start of the pandemic. Vaccine rollouts and the relaxation of travel restrictions have contributed to a recovery in travel demand. However, the fast-spreading Delta variant of the coronavirus poses a risk for the company and the rest of the industry.

American Airlines said that it expects its third quarter revenue to be down approximately 20% compared to revenue in the third quarter two years ago in FY 2019, before the shock from the pandemic. American Airlines' next earnings report (for Q3 FY 2021) is estimated to be released on Oct. 20, 2021.