American Airlines posts record quarterly revenue but slashes earnings outlook

(Sharecast News) - American Airlines reported its highest-ever quarterly revenue for its second quarter on Thursday, at $14.3bn, although that still fell short of its own expectations, as the airline also lowered its full-year earnings guidance. Its outlook for full-year adjusted earnings per diluted share were slashed to now range between 70 cents and $1.30, down from a previous $2.25 to $3.25d

The carrier reported net income of $717m, or $1.01 per diluted share, increasing to $774m, or $1.09 per diluted share, when excluding net special items.

That was above Wall Street expectations, with analysts pencilling in $1.04 per share.

Operational cash flow for the quarter was $1.1bn, with free cash flow at around $850m.

The airline reduced its total debt by around $680m during the period, and said it was on track to reduce total debt by $15bn from peak levels by the end of 2025.

American's record revenue of $14.3bn in the second quarter represented a 2% year-on-year increase.

The company achieved an operating margin of 9.7% both on a GAAP basis and when excluding net special items.

American said it was now more than $13bn, or 87%, toward its debt reduction goal, adding that it ended the quarter with around $11.7bn in total available liquidity.

Looking ahead, American acknowledged that its previous sales and distribution strategy would continue to impact revenue performance and earnings through the rest of the year.

Given current demand trends and fuel price forecasts, the airline expected its third-quarter adjusted earnings per diluted share to be about breakeven.

On the strategic front, American said that since May, it had aggressively reoriented its sales and distribution strategy to be more customer-centric.

Key actions included restoring competitive fares in traditional travel agency channels and maintaining uniform mileage earning in the AAdvantage program across all booking platforms.

The airline said it had expanded AAdvantage Business benefits to agencies, allowing companies and travellers to earn miles and loyalty points irrespective of booking channels.

Additionally, it said new features would be introduced to enhance travel management and the end-traveller experience.

American Airlines also focussed on strengthening relationships with corporate and travel agency partners by renegotiating contracts and improving support systems.

That included adding account managers for corporate customers, establishing a dedicated AAdvantage Business customer service team, and increasing sales support for agencies.

Despite significant storms affecting key hubs in May and June, American Airlines said it delivered strong operational results in the second quarter.

Over the 4 July holiday, the airline operated its largest-ever schedule, carrying 7.2 million customers with its best-ever combined completion factor.

Following a global technology outage on 19 July, American Airlines said it quickly recovered, achieving a 98.9% completion factor the next day, leading operational performance among US network carriers.

"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," said chief executive officer Robert Isom.

"We are taking this challenge head-on, with clear and decisive actions to deliver on a strategy that maximises 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."

At 0750 EDT (1250 BST), shares in American Airlines Group were down -7.08% in premarket trading in New York, at $9.45.

Reporting by Josh White for Sharecast.com.