American Airlines on Thursday reported fourth-quarter earnings that narrowly beat estimates, but forecast a drop in first-quarter sales that was a worse than Wall Street expected.
American Airlines stock and United Airlines stock fell, while other airline stocks were mixed.
United Airlines reported fourth-quarter earnings late Wednesday that beat estimates, but forecast weaker-than-expected first-quarter sales, rising costs and a pared-back flight schedule as the omicron-variant explosion suppresses demand.
The carriers report as travel demand rebounds but as the omicron variant and harsh winter weather pose threats to service. The industry has also struggled to staff up, and expressed concerns about the U.S. rollout of 5G wireless technology.
American Airlines Earnings
American lost $1.42 a share on $9.43 billion in revenue. Those figures were a bit stronger than the $1.46 per-share loss and $9.344 billion in sales forecast by FactSet.
American said it expected first-quarter revenue to be down 20%-22% compared to the first quarter of 2019, before the pandemic. Wall Street had been expected first-quarter sales that would have come in 14% lower.
Capacity should be down 8%-10% from Q1 2019 levels, American said.
Still, airline stocks analysts noted that American finished the quarter with $15.8 billion in available liquidity. And they also noted that American pulled back on operations ahead of the omicron surge.
American Airlines stock fell 3.2% in the stock market today. As with other airline stocks, its Composite and EPS Ratings — 38 and 49, respectively — are not great.
"American did not have the same issues as other airlines late in the quarter because they proactively reduced December capacity when the omicron variant started to rise," Cowen analyst Helane Becker said in a note on Thursday. "In addition, they offered employees bonus pay to work through the holidays, although pilots did not take it."
Isom To Take Over
American Airlines recently said its CEO, Doug Parker, would retire from that position on March 31. President Robert Isom will replace him. Parker will stay on as chairman of the board.
Third Bridge analyst Peter McNally noted that the transition came amid questions about American's finances and as the Justice Department tries to block the carrier's alliance with JetBlue. And he noted that the transition will occur as American tries to work off billions in debt.
"Wages and salaries are the biggest expenses for any airline and staffing aircraft has been increasingly difficult," McNally said in email on Thursday. "Isom's experience in airline operations gives American a leg up here, but these issues are going to persist."
Covid has sidelined thousands of airline workers in recent days. Limited staffing and winter storms have, in turn, led to thousands of flight cancellations. Airline stocks stumbled through much of last year.
Leisure travel has rebounded. But the recovery of international and business travel has lagged. Airlines have been trying to train more pilots as demand returns.
United Airlines Earnings
Meanwhile, United, on Wednesday, said lost $1.60 per share during the fourth quarter, narrower than a year ago. That was better than FactSet estimates for a $2.09 per-share loss.
Revenue came in at $8.2 billion. That was stronger than expectations for $7.963 billion.
The carrier said it expected first-quarter total operating revenue to fall 20% to 25% compared to the first quarter of 2019. Wall Street had forecast a 19% drop, according to FactSet.
United also said it expected adjusted unit costs, or costs spread out over an airline's available seats and flights, to rise 14% to 15% compared to the first quarter 2019.
Further out, United said it expected full-year flight capacity to be lower than 2019. Increases to its flight schedules were pushed back to later in the year due to the omicron variant's surge.
It also said its near-term schedules were smaller. But it said bookings for this spring and after "remain strong." The carrier said it expected to build up its flight capacity as the year progressed by bringing 52 grounded Boeing 777s back into service. Doing so, it said, would bring down unit costs over the year.
"While omicron is impacting near term demand, we remain optimistic about the spring and excited about the summer and beyond," CEO Scott Kirby said in a statement.
United Airlines stock fell 3.4% on the stock market today, a fourth-straight loss and dropping further below their 50-day moving average. UAL stock has a 50 Composite Rating and a 47 EPS Rating.
Other Airline Stocks, 5G Spat
Among other airline stocks, Delta Air Lines rose 2 cents on Thursday. Shares hit resistance near their 50-day line.
Last week, Delta said it expected "meaningful profit" this year as it rebounds from the pandemic, though it forecast a Q1 loss.
Southwest Airlines dipped 0.2%. The carrier reports earnings on Jan. 27,.
United last week said it was shrinking its flight schedules, after some 3,000 staff came down with Covid. CEO Scott Kirby last month also said the carrier parked 100 jets due to limited pilot availability.
Elsewhere, the deployment of new 5G technology, particularly in close proximity to airport runways in the U.S., has also raised industry concerns. AT&T and Verizon this week agreed to hold off on rolling out 5G near some U.S. airports, after airline executives wrote to officials in Washington expressing concerns the technology could interfere with altitude-measuring aviation equipment that uses similar frequencies.
The two telecom giants began deploying 5G on Wednesday. But the airline industry warned the potential disruptions could bring travel and shipping to a standstill.
"We are frustrated by the FAA's inability to do what nearly 40 countries have done, which is to safely deploy 5G technology without disrupting aviation services, and we urge it do so in a timely manner," AT&T said in a statement.
