In the past couple of weeks, Delta and United both reported their Q3 2023 financial results. I didn’t write about them, because both airlines did reasonably well and as expected — costs were up, but revenue was also up, and both airlines had good margins, given the strong leisure demand, particularly for premium products and long haul travel.
American is the last of the “big three” to report its Q3 2023 financial resorts, and it’s a very different story at the Fort Worth-based airlines.
American reports $545 million net loss
For Q3 2023, American Airlines has reported a net loss of $545 million, compared to a net profit of $930 million in Q3 2022. Here are a few of the major highlights of American’s performance:
- American had record third-quarter revenue of $13.5 billion, almost identical to the carrier’s Q3 2022 revenue
- Excluding net special items, American had net income of $263 million, compared to $478 million in Q3 2022; American primarily recorded a loss due to $983 million in charges related to the carrier’s new pilot labor contract
- American’s operating margin was -1.4%, and excluding net special items, it was 5.4%
- American’s passenger revenue per available seat mile was 16.95 cents in Q3 2023, compared to 18.08 cents in Q3 2022
- American reduced its debt by $1.4 billion in the third quarter, and the airline hopes to reduce total debt by $15 billion by the end of 2025
- American had an average load factor of 84%, and had its best-ever third quarter completion factor (meaning few flights were canceled)
- Compared to Q3 2022, labor expenses increased by 17.4%, while fuel expenses decreased by 16.6%
A mild profit excluding one-time expenses isn’t the worst thing in the world, but American’s situation isn’t looking great. American has virtually the same revenue as the same quarter last year, while expenses are up significantly, and passenger revenue per available seat mile is down.
American’s performance pales in comparison to Delta & United
Recently United Airlines CEO Scott Kirby stated that 98% of total industry revenue growth and 90% of total industry pre-tax profit would come from just Delta and United. That was a pretty clear dig at American, where Kirby used to work. So, how does American’s performance compare to that of both Delta and United for Q3 2023? Let’s focus on some of the most important metrics.
For Delta’s non-adjusted financial results:
- Delta reported net income of $1.5 billion in Q3 2023, compared to $700 million in Q3 2022
- Delta reported revenue of $15.5 billion in Q3 2023, compared to $14 billion in Q3 2022
- Delta reported an operating margin of 12.8% in Q3 2023, compared to 10.4% in Q3 2022
- Delta reported passenger revenue per available seat mile of 17.92 cents, compared to 18.19 cents in Q3 2022
For United’s non-adjusted financial results:
- United reported net income of $1.1 billion in Q3 2023, compared to $940 million in Q3 2022
- United reported revenue of $14.5 billion in Q3 2023, compared to $12.9 billion in Q3 2022
- United reported an operating margin of 12.2% in Q3 2022, compared to 11.5% in Q3 2022
- United reported passenger revenue per available seat mile of 17.01 cents, compared to 17.21 cents in Q3 2022
While American would have earned a mild profit without the one-time payment for its new contract for pilots, the carrier’s results still pale in comparison to those of Delta and United. Delta and United both have double-digit operating margins, while American’s operating margins are less than half of that. And the growth trajectory isn’t good either — American’s revenue was flat, while both Delta and United saw significant revenue growth.
Keep in mind that Q3 2023 is still a strong quarter for international travel, and that’s an area where both Delta and United are stronger than American, especially across the Atlantic. Admittedly it’s only really the first half of the third quarter where transatlantic demand is through the roof.
It’s kind of funny to me how American CEO Robert Isom is trying to paint everything as being perfect, and thinks that the reason American’s stock price is so low is because the airline isn’t doing a good job telling its story. He also states that he’s very pleased with where the airline is from a relative margin perspective. Relative to what airline, Frontier and Spirit?
Bottom line
American Airlines has reported its financial results for Q3 2023, and the airline reported over half a billion dollar loss. That loss can largely be attributed to the one-time bonus that pilots received for ratifying their new contract.
That being said, even when you take that out of the equation, American’s margins are much worse than those of Delta and United. Not only are the margins not great, but American isn’t seeing the growth in revenue that Delta and United have seen. American is just seeing higher costs but not higher revenue. But according to American’s CEO, the company just isn’t doing a good job telling its story. Hmmm…
What do you make of American’s financial results?
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