American Airlines Hikes Revenue and Margins Guidance on Demand, Pricing Strength
2022.06.03 15:41
By Daniel Shvartsman
Investing.com — American Airlines (NASDAQ:AAL) raised its Q2 2022 guidance for revenue and pre-tax net margins in a sign of both the travel resurgence and inflationary pressures on capacity and fuel costs.
In an SEC filing ahead of a conference appearance, the company shared a table with new, increased guidance for the current quarter. Citing “continued strength in the demand and pricing environment,” the company increased its revenue growth projections vs. Q2 2019 to 11-13%, from a prior expectation of 6-8%. That is all coming on the revenue side, as the company calls for total revenue per available seat mile to be 20-22% higher than the 2019 comparable, versus earlier guidance of 14-16%. Available seat miles for the quarter is expected to drop 7-8% from 2019, slightly worse than the 6-8% prior expectation. The combination of consumers eager to travel and fewer seats available is thus sending American’s revenue higher.
American Airlines raised its average fuel price expectations considerably as well, going from expectations of $3.59-$3.64/gallon to $3.92-$3.97 for jet fuel. Cost per average seat mile excluding fuel and net special items is also expected to be higher than previously, due to “slightly lower capacity and higher selling expenses.” For all that, the airline raised its pre-tax margin guidance from 3-5% to 4-6%, suggesting the revenue upside more than offset the cost pressures.
American Airline shares are trading 0.9% lower pre-market, and still well off pre-pandemic levels or even 52-week highs, as the recovery hasn’t translated to the full income statement yet. Pre-tax margins in the comparable 2019 quarter were 7.4% or 9% before special items. The company also has more than $5 billion in net debt and 200 million more shares outstanding, legacies of capital needs as it sought to survive the nadir of pandemic travel demand.
