Release Date: January 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American Airlines Group Inc (AAL, Financial) reported a fourth quarter adjusted pretax profit of $808 million, exceeding guidance expectations.
- The company achieved a record free cash flow of $2.2 billion in 2024, and reduced total debt by more than $15 billion from peak levels in mid-2021.
- A new 10-year agreement with Citi was announced, expected to drive substantial incremental value through the AAdvantage co-branded credit card portfolio.
- American Airlines Group Inc (AAL) delivered nearly $500 million of value through reengineering initiatives, surpassing expectations by $100 million.
- The company reported strong passenger revenue growth, with premium revenue increasing approximately 8% year-over-year and loyalty revenues up 14% year-over-year.
Negative Points
- Fourth quarter unit costs, excluding fuel and net special items, increased by 5.7% year-over-year.
- The company expects a first quarter loss of approximately $0.20 to $0.40 per diluted share in 2025.
- Latin unit revenue was down on a year-over-year basis, although improvement is expected in the first quarter.
- First quarter nonfuel unit costs are projected to rise by high single digits year-over-year, driven by reduced capacity and new labor agreements.
- Despite achieving debt reduction goals, the company still faces a significant total debt of $38.6 billion.
Q & A Highlights
Q: Can you discuss your assumptions on indirect revenue improvement and the industry outlook underlying your full-year guidance?
A: Robert Isom, CEO, stated that American Airlines is on track to recover lost indirect revenue and feels confident about the progress made. He believes that the company is poised to outperform competitors in a recovering economy. CFO Devon May added that capacity is expected to grow modestly, with quarterly increases of about 3% in ASM capacity.
Q: With the medium-term debt goal reached, how are you thinking about capital allocation between now and 2027?
A: Devon May, CFO, emphasized that the focus remains on improving the balance sheet, with a new goal to reduce total debt to around $35 billion by 2027. The company will continue reinvesting in the business and will discuss other capital allocation priorities as free cash flow improves.
Q: Can you talk about the progression of RASM throughout Q4 and regional expectations for Q1?
A: Robert Isom, CEO, noted strong performance across all regions in Q4, with American Airlines leading network competitors. He expects continued strength domestically and anticipates robust demand for travel to Europe, driven by the strong dollar.
Q: How is American Airlines addressing the margin range between top and bottom hubs?
A: Robert Isom, CEO, explained that the company is focused on building back its network, particularly in regional fleet deployment. He highlighted improvements in performance at hubs like DFW, Charlotte, and Miami, and noted efforts to enhance operations in New York and Los Angeles.
Q: How does the profitability of the corporate business compare to pre-adjustment levels?
A: Steve Johnson, Chief Strategy Officer, explained that American Airlines has adjusted its corporate discounting strategy to be more competitive, impacting about 24% of corporate customers. The revised agreements are expected to be accretive, with a slight increase in sales expense impacting CASM by less than 1 point.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
