After two consecutive years of losses, Fort Worth-based American Airlines reported a profitable year and end-of-year quarter due to higher airfare.
In a meeting with investors, the company reported $803 million in the fourth quarter of 2022 – about twice the amount the company made in 2019. American ended the year with $127 million in profits.
American executives are hoping to ride the wave of high travel demand, with plans to hire more pilots, add more planes to its fleets and invest in tech to avoid a poor weather disaster similar to Southwest. But American faces challenges — like reducing billions in debt it garnered mostlyfrom modernizing its fleet and getting enough pilots and airplanes into the air.
American is turning the corner from two years of losses. The company took a hit during the pandemic, losing $10.9 billion in 2020 and 2021.
Avoiding a winter disaster
American’s competitor in North Texas, Dallas-based Southwest, reported a $200 million loss in the fourth quarter due to a winter storm that resulted in more than 17,000 canceled flights and a federal investigationby the U.S. Department of Transportation.
American CEO Robert Isom credits investing in tech to keep track of crews, planes and maintenance requirements for helping the company avoid a similar fate.
Chief Operating Officer David Seymour added that they’ve been working with IT employees to enhance the technology that allows them to manage severe weather.
“These events … change very dynamically and very quickly, and we have to stay in front of them,” Seymour said. “But more importantly is the recovery. We started looking at the forward look of what the storm potentially could be and started building our recovery plan before the storm, and that’s where we’re very focused on.”
Challenges ahead
Chief Financial Officer Devon May said American plans to hire 2,000 pilots this year. The company is eager to ratify labor contracts but does not anticipate that happening in the first quarter of the year, May added. The airlines are currently negotiating with pilot and flight attendant unions, both of which have been picketing due to labor shortages and scheduling.
The amount of money American can make per available seat-mile is expected to be at least 24% higher than last year, May said. Seat-miles are an industry term aimed at estimating a plane’s capacity. An available seat-mile is equal to the number of seats onboard an aircraft multiplied by the distance the aircraft flies.
But the cost to carry passengers is expected to be higher as American plans to ratify labor contracts, May said.
American is also investing in airplanes. The company has received the delivery of 10 airplanes and reactivated five out of long-term storage, Kerr said. This year, they expect the delivery of two A321neos, activate nine 738s from long-term storage and expect the delivery of 17 of Boeing’s 737 MAX-8s, Kerr said.
The biggest challenge for the company is not so much competition with other airlines such as Southwest Airlines, but getting enough aircraft and pilots into the air to fill the demand, said Dhierin-Perkash Bechai, an analyst at AeroAnalysis International.
“American Airlines disrupted the regional airline pilot market by offering significantly higher pay at its owned regional airlines,” Bechai wrote by email. “But it seems that while they increased the pay, the desired effect has not been there as there still are big shortages to operate their desired regional network.”
Seth Bodine is a business and economic development reporter for the Fort Worth Report. Contact him at seth.bodine@fortworthreport.org and follow on Twitter at @sbodine120.
