Christine Boynton April 25, 2024
Credit: American Airlines
Improvement at Boeing starts with producing quality products one at a time off the assembly line, American Airlines CEO Robert Isom says, urging the OEM to get back to the basics – looking for results, not promises.
“I can’t tell you if they’re making progress or not because it’s all actions that matter, not words,” Isom said on the carrier’s April 25 earnings call. “We’ll do everything we can to support Boeing; we need them to be successful in the long run. But as I’ve said before, we’re going to make sure that we’re protected.”
American now expects to take delivery of 22 new mainline aircraft in 2024, down from its prior March estimates of 29: 16 Boeing 737-8s, three 787-9s, and three Airbus A321neos – or four fewer MAXs and three fewer 787s.
The airline took delivery of one Embraer E175 in the first quarter (Q1) and expects 11 more to join its regional fleet in 2024, part of an order for 90.
“I want to give a shout-out to Embraer,” Isom said, “they have delivered day-in and day-out throughout the pandemic no matter the concerns of their supply chain – the rest of the industry and our OEMs can learn a lot from them.”
While Boeing delivery delays have impacted American’s mainline capacity production, CFO Devon May said those impacts have been largely offset by improvements in its regional aircraft utilization. American has touted its focus on filling a gap in regional service, operating the equivalent of around 465 fully utilized regional jets (RJs) in Q1, and projecting that figure to grow by about 20-25 RJs every quarter throughout 2024.
The airline is planning for second quarter (Q2) capacity growth of 7-9% year-over-year, primarily through improvements in aircraft utilization, while continuing to expect mid-single-digit capacity growth for the full year.
Describing the overall demand environment as strong, American found itself adversely affected by a glut of competitive capacity during the first three months of 2024. The airline sees that beginning to change, with a reduction coming most heavily in the narrowbody system, it says.
“Our network was uniquely impacted by increased industry capacity in the first quarter,” Isom told investors. “But we see that moderating in the quarters ahead… increasing the utilization of our fleet is a priority, but we can improve the deployment of our own capacity to better match supply and demand throughout the year.”
Going forward, it will take a more cautious approach to off-peak flying.
“In our first quarter we flew too much,” Chief Commercial Officer Vasu Raja said. “When you look at what we did, about 60% of our growth ASMs were in off peak times of day or days of the week, which is about 10-15 points higher than our next competitor.”
The carrier continues to appeal a federal ruling that ordered the cessation of its Northeast Alliance partnership with JetBlue Airways. Isom described American as confident in the facts of their case, which he said is focused on setting the right precedent.
“At some point in time we may want to entertain something again, but right now it’s really just to make sure that we have our interests protected,” he said.
American reported record Q1 revenue of $12.6 billion, up 3.1% year-over-year, on a 6.9% lift in operating expenses. Expenses for the quarter included a 17.8% jump in salaries, wages and benefits, as well as a 24.2% lift in maintenance costs. It posted a net loss of $312 million for the quarter, a reversal from its $10 million net profit in Q1 2023. Premium content – which American defines as upsell, loyalty and partnership revenue – now accounts for 61% of its total revenues. During the quarter, the airline reduced its debt by nearly $950 million, bringing the remaining net figure to $33.4 billion. American expects to be more than 85% of the way to its $15 billion total debt reduction goal by the end of the year. Its Q2 guidance projects adjusted earnings per diluted share of $1.15-1.45, and $2.25-3.25 for the full year 2024.
Looking ahead at summer travel, the airline described healthy bookings, with June about 50-60% booked in its long-haul network “and building all of the time depending on the entity,” noted Raja, and about 35-40% booked up in domestic.
“We see demand coming back; it’s strong again this year,” Isom said. “That’s favorable for American Airlines because that demand is also coming in the places that we are strong.”
Christine Boynton is a Senior Editor covering air transport in the Americas for Aviation Week Network.