American Airlines Q2 Earnings: Mixed Performance Amid Cost Pressures, Lowers Annual Profit Outlook

American Airlines Group Inc. AAL reported second-quarter 2024 financial results and lowered its 2024 EPS outlook.

The airline reported second quarter total operating revenue growth of 2% year-over-year to $14.334 billion, missing the consensus of $14.36 billion.

The adjusted operating margin stood at 9.7% in the second quarter, compared to 15.4% a year ago. Operating expenses increased by 8.9% year over year to $12.95 billion.

The company reported an adjusted EPS of $1.09, down from $1.92 a year ago and above the consensus $1.05.

In the second quarter, the company generated an operating cash flow of ~$1.1 billion and a free cash flow of ~$850 million.

American Airlines ended the quarter with ~$11.7 billion of total liquidity and reduced its total debt by nearly $680 million in the second quarter. The company is now more than $13 billion, or approximately 87%, toward its goal of reducing total debt by $15 billion by the end of 2025.

Revenue passenger miles increased 8.5%, Available seat miles (ASM) was up 8%, and passenger load factor for the quarter was 86.6% compared to 86.2% in the same quarter last year. Total revenue per available seat miles for the quarter declined 5.6%.

The average aircraft fuel price, including related taxes (dollars per gallon), rose 3.3% YoY to $2.70, and the operating cost per ASM increased 0.8%.

“American has a fleet, network and product built to deliver results, but during the second quarter, we did not perform to our initial expectations due to our prior sales and distribution strategy and an imbalance of domestic supply and demand,” commented American’s CEO Robert Isom.

Third-quarter Guidance: American Airlines expects adjusted EPS to be ~breakeven and adjusted operating margin of ~ 2% to 4%.

Total capacity is expected to increase by 2% to 4%, TRASM to decline by 2.5% to 4.5%, and CASM-ex to increase by 1% to 3%.

2024 Guidance: American now expects an adjusted EPS of $0.70 to $1.30 (prior $2.25 to $3.25) versus the consensus of $1.81. It expects 2024 operating margin of 3.5% to 5.5%.

Price Action: AAL shares are trading higher by 2.41% at $10.42 at the last check Thursday.

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