American Airlines Group Inc. (AAL) took flight in the third quarter, exceeding earnings expectations and signaling a bright future with an upgraded 2024 outlook. The airline reported total operating revenue of $13.647 billion, a 1.2% year-over-year increase, surpassing the consensus estimate of $13.471 billion. While the adjusted operating margin dipped slightly to 4.7% from 5.4% in the previous year, it remained impressive.
The company’s profitability shone through with adjusted earnings per share (EPS) of $0.30, surpassing analysts’ projections of $0.15, even though it fell short of the $0.38 reported a year ago. This positive performance was accompanied by robust cash flow generation, with American Airlines achieving an operating cash flow of approximately $3.585 billion and a free cash flow of ~$2.382 billion for the nine months ending September 30.
Beyond the impressive third-quarter results, American Airlines provided a glimpse into its optimistic future. The company remains dedicated to financial strength, ending the quarter with $11.8 billion in total liquidity and successfully reducing its debt by nearly $360 million. This progress aligns with the airline’s ambitious goal of reducing total debt by $15 billion by the end of 2025, with a significant $13 billion already achieved.
Operational performance also showcased positive trends. Revenue passenger miles climbed by 6.4%, while available seat miles (ASM) increased by 3.2%. The passenger load factor reached 86.6% for the quarter, a notable improvement from 84% in the same period last year. However, the company experienced a 2% decline in total revenue per available seat miles for the quarter.
Fuel efficiency played a key role in the airline’s financial success. The average aircraft fuel price, including related taxes, decreased by 14% year-over-year to $2.50 per gallon. This favorable fuel environment contributed to a 4.2% reduction in operating cost per ASM.
Looking ahead, American Airlines provided a promising fourth-quarter guidance. The company expects adjusted EPS to be between $0.25 and $0.50, with an adjusted operating margin ranging from 4.5% to 6.5%. Total capacity is projected to expand by 1% to 3%, while TRASM is anticipated to decline by 1% to 3%. CASM-ex is expected to increase by 4% to 6%.
Perhaps the most compelling news for investors came in the form of the upgraded 2024 outlook. American Airlines now projects adjusted EPS to be between $1.35 and $1.60, a significant improvement from the previous range of $0.70 to $1.30, and exceeding the current analyst consensus of $1.21. The company also expects a 2024 operating margin of 4.5% to 5.5%.
These positive financial projections and operational achievements were reflected in the market’s response. AAL shares surged by 3.7% at the last check on Thursday, reaching $13.31.