At the moment, we’re seeing airlines report their financial results for Q2 2024. Delta was the first to report its results, which weren’t great, as the airline saw profitability decline considerably, despite record revenue. United was next to report its results, and actually had pretty solid performance, putting it very much in Delta’s league.
That leaves the third of the “big three” US carriers, which is by far the weakest when it comes to profitability. American has just reported its results, and while Q2 2024 was okay, the carrier’s outlook is really rough…
American reports record revenue, lower profits
American has reported its Q2 2024 financial results. The good news is that the airline reported highest ever quarterly revenue of $14.3 billion, compared to $14.06 billion in Q2 2023. The bad news is that the airline reported a huge drop in profits, as net income was $717 million, compared to $1.34 billion in Q2 2023.
As you can see, American’s profits fell by around 50% compared to the previous year, which is not great. In fairness, profitability decreasing year over year is a general industry trend. Airlines are dealing with higher costs, and yields are also decreasing compared to the previous year, given how much capacity has increased.
While airlines are largely blaming these poorer financial results on industry overcapacity, that’s not something I see changing for the better any time soon. Airline executives like to tell the narrative that things will change for the better on that front, but when they keep taking delivery of more and more planes, that seems unlikely.
For what it’s worth, both Delta and United reportedly $1.3 billion in net income for Q2 2024, so as you can see, American is at a significant disadvantage.
To look at some other interesting statistics, American’s passenger revenue per air seat mile for the quarter was 17.54 cents, compared to 18.63 cents in the same quarter the previous year, representing a decrease of 5.8%. Meanwhile the cost per air seat mile for the quarter was 17.21 cents, compared to 17.07 cents in the same quarter the previous year, representing an increase of 0.8%.
Here’s how American CEO Robert Isom describes these results:
“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. We are taking this challenge head-on, with clear and decisive actions to deliver on a strategy that maximizes our revenue and profitability, and importantly, one that makes it easy for customers to do business with American. When we return to the level of revenue generation we know we can achieve, and we couple that with our operational reliability and best-in-class cost management, we will unlock significant value.”
Okay, that all sounds great, but what exactly is the strategy that’s going to maximize revenue and profitability, and provide best-in-class cost management? That of course all sounds great, but is easier said than done.
Below is a fact sheet with some of American’s Q2 2024 financial results.
American expects to breakeven this quarter?!?
Here’s where it gets really ugly. American has updated its guidance for Q3 2024, and the airline only anticipates breaking even during the quarter, as it expects unit revenue to drop by as much as 4.5%. The airline claims that this is based on the company’s previous failed sales and distribution strategy, as well as based on current demand trends, and the current fuel price forecast.
Furthermore, the breakeven number excludes any net special items, and the airline may very well be paying out a lot of cash to flight attendants in retroactive pay, as part of a new flight attendant contract.
Honestly, what an absolute disaster American is. The airline lost $312 million in the first quarter, made $717 million in the second quarter, and expects to breakeven in the third quarter. In the fourth quarter of 2023, American made only $19 million, and 2023 was a much better year for airlines than 2024. So will American even breakeven in 2024, or will the airline report a loss?
I don’t understand how American’s current management team is still in power. This seems like borderline negligence on the part of the company’s board. How can you watch an airline underperform quarter after quarter, and just not do anything?
As I’ve often said, airline executives have tough jobs, and they always have to sell Wall Street on what a good investment airlines are, even though they aren’t. I’m reminded of how in 2017, former American CEO Doug Parker said that the airline would never lose money again, and even in a bad year, the airline should earn around $3 billion in profits. That sure didn’t age well, did it?
While all airlines are tough businesses, you can’t help but notice the contrast in direction between American and United, with Scott Kirby now at the helm at United. He has brought United into Delta’s league, and has left American in the dust. So while virtually all airlines are having a tougher time than in 2023, that doesn’t mean they’re performing equally poorly.
Bottom line
American has reported its Q2 2024 financial results. The airline has reported record revenue… and that’s where the good news stops. Profits fell around 50% compared to the same quarter last year, and even worse, American only expects to breakeven in the third quarter. At this point, American will be lucky if it even breaks even for the entire year.
While all airlines are dealing with lower revenue (which they blame on “overcapacity”), American’s results are especially awful.
What do you make of American’s financial results, and performance compared to Delta and United?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.