American Airlines Saw A $545 Million Loss In Q3

American Airlines has posted its third-quarter results for this year. While there are some positives to be drawn, the headline loss will make for some uncomfortable reading for the carrier’s shareholders.

Highs and lows

On the back of posting a third-quarter (Q3) net loss of $545 million, American Airlines has been forced to cut its profitability forecasts for 2023.

The Fort-Worth-based airline is currently struggling on several fronts – rising fuel costs, expensive labor contracts, and a cooling of demand for domestic US travel.

Photo: Santi Rodriguez I Shutterstock

In August, the company warned that third-quarter costs would rise following a new labor deal with its pilots that included more than $9.6 billion in total pay and benefits increases over the next four years.

Consequently, the carrier is now expecting profits to fall to $2.25 to $2.50 per share for the year, compared with its previous forecast of $3 to $3.75 per share.

Earlier today, the airline’s shares dropped around 1.5% of their value in pre-market trading on the New York Stock Exchange.

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However, despite the dip in prospects for the immediate future, some positives can be taken away from the Q3 announcement. The airline announced revenues for Q3 reached an impressive $13.5 billion – a new Q3 record for the airline.

On announcing the airline’s latest performance figures, Robert Isom, American Airlines’ CEO, said,

“The American Airlines team continues to produce strong results. Our team is delivering record-setting reliability and operational performance. We are executing on our plans and remain well-positioned for the future, supported by the strength of our network, our young and modern fleet, and our outstanding team.”

Other financial details

The airline’s Q3 revenue earnings of $13.5 billion were said by the carrier to have been driven by resilient demand over the summer along with its “record-setting” co-branded credit card and travel rewards program. Net income for Q3 rounded out at $263 million.

Photo: Vincenzo Pace I Simple Flying

The carrier reported year-over-year corporate and government revenue growth in the third quarter, alongside continued strength in demand and revenue from unmanaged business travel, where travel agent commissions are reduced.

The company reduced its total debt total by $1.4 billion in the third quarter as it continued to work on strengthening its balance sheet. The carrier said it is now more than 70% of the way to its goal of reducing total debt by $15 billion by the end of 2025.

How reliable is the airline?

While the carrier’s latest financial results might be a mixed bag, American delivered a solid operational performance during the third quarter.

American operated more than 515,000 flights during the period with an average network load factor of 84%. The company produced its best-ever third-quarter completion factor, which it claims to be the highest completion factor among the major US network carriers.

Photo: Cagliardi Photography | Shutterstock 

Completion Factor is defined as the percentage of scheduled flights completed (i.e., not canceled) over a specified period.

Looking ahead, according to a company statement, the airline is “committed to building on this momentum and delivering a reliable operation for customers during the upcoming holiday travel seasons [Thanksgiving and Christmas].“

The way ahead for American

This set of results paints a picture of an airline gaining ground in some respects yet, behind the scenes, is engaged in an ongoing battle against rising costs, fluctuating demand, and the ever-present threat of competition from United Airlines and Delta Air Lines in particular.

While announcements of new routes keep coming from the airline’s Texas headquarters, the carrier has faced several distractions this past few months.

Photo: Grek K__ca | Shutterstock

These range from a flight attendant vote of no confidence, being mixed up in child trafficking allegations, the death of a ground worker in Austin, discovering the use of fake engine parts, and most recently, its pilots’ union telling its members to refuse to fly to Israel.

With the busy Thanksgiving travel period just over a month away and the Christmas peak just a month later, American Airlines will be desperate to maintain high levels of punctuality, reliability, and customer service as passenger numbers soar.

Photo: Austin Deppe | Shutterstock

After all, as was seen last year, an airline’s reputation can sustain severe damage if it doesn’t live up to expectations over the two busiest travel periods of the year.

What are your thoughts on the latest results from American Airlines? Give us your views in the comments.