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Americans’ Q4 results underscore travel recovery


American Airlines Key Stats
Q4 2022 (estimated) 4th quarter of 2021 Q4 2020
Adjusted EPS $1.12-$1.17 ($1.42) ($3.86)
Revenue $13.1-$13.2 billion $9.4 billion $4B
Load factor 84.4% 80.2% 64.1%

The source: Alpha can see. EPS and Q4 2022 revenue reflect American Airlines’ January 12 forecast.

The American report will likely highlight a renewed recovery in the US aviation industry reeling from COVID 19 and soaring jet fuel prices. It will mark the company’s third consecutive quarter of profit after nine consecutive quarters of substantial losses due to the pandemic on a per-share basis.

In the first day of this month, Delta and unified Both reported that strong travel demand and higher fares boosted their fourth-quarter earnings significantly, despite winter storms that crippled air travel last week. last of the year.

American’s January 12 update quickly put their stock up 10%, and they’re up 28% since the start of the year. They rose 6% in the fourth quarter, cutting their 2022 loss to 29%, compared with gains of 11% and 20%, respectively, for the broader S&P 500 transportation sector as measured by the SPDR S&P Transportation ETF (see chart below).

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Q4 marked a year of steady improvement for US air travel. Loading Elementsor the percentage of seats available that are already filled with passengers, increasing across the industry. US fourth-quarter load factor could hit 84% in the third quarter after fluctuating from 42% to 80% from the first quarter of 2020 to the first quarter of 2022.

However, as travel demand increases, airlines face rising jet fuel costs due to increased inflationary. According to Visible Alpha, those costs were moderated in the fourth quarter, as operating costs for Americans could increase 16% year-over-year. That’s down from a 32% increase in the third quarter.

The US Energy Information Administration predicts jet fuel prices will fall further in 2023, averaging 15% lower than last year. For airlines and their investors, however, it’s up to the US economy to experience a soft landing or a full-blown recession. Depression Between Federal ReserveA campaign to raise interest rates to lower inflation could decide whether normal travel demand continues to return.

Review 2023

Earlier this month, Delta and United officials expressed optimism that the “air travel landscape remains favorable,” as Delta CEO Ed Bastian said. However, both airlines note that labor costs remain an issue. United said aircraft shortages and outdated technology could limit the industry’s capacity.

Southwest Airlines, which also reported fourth-quarter earnings on Thursday, has received much criticism for not upgrading its technology as it struggled to reschedule flights due to weather delays late last year. Additionally, a system outage earlier this month at the Federal Aviation Administration (FAA) disrupted thousands of flights.

However, Jamie Baker, an aviation analyst at JPMorgan, said in a recent research report that travel demand includes both the main price increase and downside risk to Americans this year as the company continues to try to reduce its substantial debt.

“We see the need to do to strengthen our balance sheet,” Baker wrote in his report. “Nevertheless, leverage will benefit US stock prices given the rapid demand recovery we are starting to see.”

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