American Airlines Sees Returning to Profitability in March, Warns of Higher Costs

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American Airlines Group Inc. on Thursday forecast returning to profitability in March, after reporting a smaller fourth-quarter loss, but said cost pressures would remain elevated this year due to the Omicron coronavirus variant-induced turmoil.

The Texas-based carrier said ticket sales are still not back to pre-Omicron levels, but they are recovering “quickly” after dropping off “considerably” in early December.

The company said domestic leisure and short-haul international traffic were approaching their 2019 levels, but demand for long-haul international remained challenged.

Domestic business travel, which accounted for 30 percent of the company’s 2019 passenger revenue, recovered in the latest quarter to about 70 percent of the pre-pandemic level.

American, however, said the volatility in travel demand due to new COVID-19 variants has created “the most challenging planning environment in the history of commercial aviation”.

The carrier plans to match its capacity with bookings trends. It expects its capacity in the quarter through March to be down about 8 percent to 10 percent compared to the same period in 2019. Full-year capacity is projected to be 5 percent lower than in the pre-pandemic year.

Its revenue in the current quarter is estimated to be down 20 percent to 22 percent versus the first quarter of 2019 due to the Omicron variant’s impact on demand in the first two months of the quarter.

U.S. carriers benefited from millions of Americans flying in November and December.

Demand during Christmas Eve and New Year’s Eve was strong as well, although mass flight cancellations towards the end of the year due to rising COVID-19 infections among employees and inclement weather meant airlines could not fully tap that demand.

American said the impact of rising COVID-19 cases on travel demand, along with elevated fuel prices, would pressure its profits in near-term. Higher wages and increased training costs are also pinching the company.

The carrier said it plans to hire another 18,000 employees this year after adding 16,000 new team members last year.

It expects higher costs in the current quarter than in the same period in 2019. Overall, costs this year are now expected to be 5 percent higher than in 2019.

On an adjusted basis, American reported a loss of $1.42 per share for the quarter through December, compared with a loss of $3.86 per share a year ago. Analysts surveyed by Refinitiv, on average, had expected a quarterly loss of $1.48 per share.

Operating revenue for the quarter rose to $9.43 billion from $4.03 billion a year earlier.

By Rajesh Kumar Singh and Abhijith Ganapavaram

Reuters

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