Three U.S. airlines on Wednesday warned of higher fuel costs in the third quarter due to a jump in crude prices, adding to pressures the industry faces from expensive labor contracts.
25.08.2023 - 13:12 / skift.com / Delta Air Lines / Vasu Raja / Robert Isom / United Airlines / Airlines
American Airlines is performing well, and it expects the strength to continue. The Fort Worth-based Oneworld carrier said on Thursday it generated $14.4 billion in revenue for the second quarter. Net profit reached nearly $1.4 billion.
Strong ticket sales contributed to the airline earning its highest quarterly revenue in the company’s history. Profits were also boosted by a 35% decline in average jet fuel prices.
Because of the strong results, the airline lifted its earnings outlook for 2023: It now expects $3 to $3.75 per share, up from its previous forecast of $2.50 to $3.50.
“Our operation is performing at historically strong levels, and we have worked to refresh our fleet and build a comprehensive global network, all of which helped to produce record revenues in the second quarter,” said American’s CEO Robert Isom.
American has also seen a recent upgrade in its credit rating. Reducing debt is a top priority, and an upgraded score supports its goal of BB credit metrics by the end of 2025.
Its operating profit margin was 15% – solid, but below the 17% of Delta and United. That’s in large part because American’s network is domestic-orientated, and international routes have the strongest demand.
Last week, United Airlines pilots reached agreement on a contract valued at $10 billion that would increase pilot wages by 40% over four years. The contract was a topic of conversation throughout the conference call, and American executives were clear about their plan moving forward.
“We’re working with the Allied Pilots Association (APA) and our pilots. Our intent is to match the wages,” said Isom.
The APA valued American’s previous wage deal at $8.3 billion over four years. It is likely to cost around $9.5 billion to match United.
American expects the tentative agreement to be approved in August.
On July 21st, American Airlines and JetBlue Airways will end their Northeast Alliance partnership after a judge ruled that the deal violated antitrust laws.
American Chief Commercial Officer Vasu Raja was not worried about the partnership ending and said there are two reasons why the airline will continue its success without JetBlue.
“Previously, we didn’t match the demand. The majority of demand in New York was for short-haul, day-trip business markets. Our slot portfolio better matched midcontinental, transcontinental, and transatlantic markets,” he said.
The change in business travel demand has meant the New York customer has transformed since before the pandemic. Secondly, American said it’s reduced expenses in New York drastically.
“Our expense base, especially in New York Kennedy, changed through co-locating partners and fleet changes,” said Raja. “We don’t expect any material changes to our financial
Three U.S. airlines on Wednesday warned of higher fuel costs in the third quarter due to a jump in crude prices, adding to pressures the industry faces from expensive labor contracts.
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