2024 has been a rollercoaster of emotions so far in terms of the aviation market. American Airlines cannot avoid itself from also being aboard that rollercoaster. AA is the last of the big three American carriers to release its financial performance for 2024 Q2 and it has a bit of a bittersweet taste. Here's why.
Quarterly Revenue Never Been Higher for American Airlines
Let's start off with what looks good in the American Airlines balance sheet. Revenue was sky high. The airline has never wrapped up a quarter with such a high revenue. Operating revenue clocked in at 14.3 billion USD, split in:
- 13.2 billion from passenger operations.
- 195 million from cargo operations.
- 937 million from other operations
That 14.3 billion USD revenue figure is up by 2% YoY. Last year's Q2 figure was a flat 14 billion Dollars.
Another piece of positive data is in the ASM and RPM (Available Seat Miles and Revenue Passenger Miles). Both KPIs grew in Q2 2024 over the same period of 2023. However, RPM grew faster than ASM meaning that the airline has been capable of filling its planes more and better. The improved capability of filling the planes is perfectly summarised by the load factor. Load factor grew in Q2 2024 over Q2 2023 by 0.4 points going up from 86.2% to 86.6%. American Airlines planes were fuller across the board in both domestic and international flights.
The accompanying statement to the balance sheet also reiterated how the airline is rapidly backtracking on the controversial sale strategy plan it had announced to differentiate reward mile redemption based on sale channel. That is no longer a thing and AA strongly states it is working closely with partners accepting feedback.
Costs Also Growing Rapidly in Q2 2024
Now let's go into what isn't all that pretty American Airlines' Q2 reporting sheet. The airline's net income and therefore its operating margin are lower than where they were at the end of June in 2023.
Net income is down by 46% in Q2 2024 over Q2 2023 with the overall number decreasing from 1.3 billion to 717 million USD. The figure looks even worse if we look at 2024's first six months comparing it to the same period the prior year. In this case the net income contracted by 70% although overall revenue increased by 2% in 2024.
Inevitably operating margin also suffered. It went down to single digit figures in Q2 to 9.7% from 15.4% of the same period last year. The overall semester performance now has AA's operating margin at 5.5% again 2023's 9.9%.
So, how come revenue is up but net income is down? Long story short, costs have gone up significantly for American Airlines. The carrier has seen its fuel cost go up along with its staff costs. Pilots have become more expensive with the new contracts that have been negotiated in the past months and years. Maintenance costs have also increased making the entire operation less profitable in the bottom line.
We'll have to wait for Q3's figures to get a better feel for how American Airlines is likely to wrap up 2024. It's looking more unlikely that it'll be a high profit year though.
