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Wherever It Looks, American Airlines Sees Strong Demand

Date: October 22, 2022

By Ted Reed, Forbes

Like its peers, American Airlines reported strong third-quarter demand that is continuing into the current quarter.

“Demand is strong,” CEO Robert Isom said Thursday morning on CNBC’s Squawk Box. “We’re really pleased [with] profitability two quarters in a row, projecting a third. It’s all fueled by a terrific demand environment” for leisure, international and business travel.

Nevertheless, “We have not grown as much as the economy,” Isom said, explaining the rationale for future growth.

American shares closed Wednesday at $13.99. In premarket trading Thursday, shares were up about 3%.

In the third quarter, American reported revenue of $13.5 billion, its highest quarterly revenue ever, up 13% from the same quarter in 2019 despite flying 9.6% less capacity. Excluding items, the carrier reported net income of $478 million or 69 cents per share. Analysts had expected 56 cents.

Looking ahead, American expects current quarter total revenue to be 11% to 13% higher versus the fourth quarter of 2019 on 5% to 7% lower capacity: It expects an operating margin between 5.5% and 7.5%, with earnings per share excluding items to be between 50 cents and 70 cents.

Like other carriers, American is seeing a post-pandemic willingness of passengers to pay up for premium seats – Isom said load factors in premium seats are 5% to 10% higher than pre-pandemic – and that “blended travel” is creating new patterns, such as adding a few days to business trips in order to work remotely in a chosen destination.

In a prepared statement, American said demand for domestic and short-haul international travel remains very strong and the airline expects further improvement in demand for long-haul international travel as travel restrictions and testing requirements are lifted around the globe.

The carrier said it ended the third quarter with $14.3 billion of available liquidity, more than double the available liquidity at year-end 2019. Its fleet is “the youngest, most fuel-efficient fleet among U.S. network carriers,” Isom said. American has maintained that because of its newer fleet, it will have lower capital expenditures than competitors going forward.

Also, American noted that it is flying more than competitors. In the third quarter, the carrier “flew a schedule that was more than 25% larger than its closest competitor as measured by total departures,” it said, and it expects to operate 5,100 daily departures for the rest of the year. Average third-quarter load factor was 85.3%, which is 6.6 points higher than load factor in the third quarter of 2021.

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