On July 25, 2024, American Airlines Group Inc (AAL, Financial) released its 8-K filing for the second quarter of 2024. American Airlines, the world's largest airline by aircraft, capacity, and scheduled revenue passenger miles, reported its highest-ever quarterly revenue of $14.3 billion. However, the company faced challenges that impacted its earnings per share (EPS).
Company Overview
American Airlines operates major hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. It generates over 30% of US airline revenue connecting Latin America with destinations in the United States. The company boasts the youngest fleet among US legacy carriers following a significant fleet renewal.
Performance and Challenges
American Airlines reported a net income of $717 million, or $1.01 per diluted share, for the second quarter. Excluding net special items, the net income was $774 million, or $1.09 per diluted share. This fell short of the analyst estimate of $1.11 per share. The company attributed the shortfall to its prior sales and distribution strategy and an imbalance of domestic supply and demand.
CEO Robert Isom commented,
“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.”
Financial Achievements
Despite the challenges, American Airlines achieved several financial milestones:
- Generated operating cash flow of approximately $1.1 billion and free cash flow of approximately $850 million in the second quarter.
- Reduced total debt by approximately $680 million in the second quarter.
- On track to reduce total debt by $15 billion by year-end 2025.
These achievements are crucial for the company's long-term financial health and operational efficiency.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Total Operating Revenues | $14.3 billion | $14.1 billion | 2.0% |
| Net Income | $717 million | $1.3 billion | -46.4% |
| Earnings Per Share (Diluted) | $1.01 | $1.88 | -46.3% |
| Operating Margin | 9.7% | 15.4% | -5.7 pts |
Operational Performance
American Airlines demonstrated resilience in recovering from irregular operations, despite significant storms impacting several key hubs in May and June. The airline delivered a strong performance over the Fourth of July holiday, carrying 7.2 million customers and operating its largest-ever schedule.
Balance Sheet and Liquidity
American Airlines remains committed to strengthening its balance sheet. The company ended the quarter with approximately $11.7 billion of total available liquidity, comprised of cash and short-term investments plus undrawn capacity under revolving credit facilities.
Guidance and Outlook
American Airlines has taken aggressive action to improve its revenue performance. However, the company's previous sales and distribution strategy will continue to impact its revenue performance and earnings through the remainder of the year. The company expects its third-quarter 2024 adjusted earnings per diluted share to be approximately breakeven and its full-year 2024 adjusted earnings per diluted share to be between $0.70 and $1.30.
For more detailed financial information, please refer to the company's 8-K filing.
Explore the complete 8-K earnings release (here) from American Airlines Group Inc for further details.
