American Airlines: Q2 Corp. Travel Recovery Could Hit 90 Percent

American Airlines’ total business travel demand is about 80 percent recovered compared with 2019 levels with small and midsize business revenue approaching a full recovery and revenue from large corporate clients about 50 percent recovered, CEO Robert Isom said Thursday during a first-quarter earnings call. 

“Corporate bookings are at the highest they’ve been since the onset of the pandemic, and we expect that to continue as more companies reopen their offices,” Isom said. “We anticipate overall business revenue to be 90 percent recovered in Q2.”

Long-haul international travel was about 50 percent recovered for the quarter and 60 percent recovered for March, Isom added. The company anticipates business travel along with international demand to continue to return and, despite expected continued elevated fuel prices, expects to be profitable in the second quarter, based on current demand trends and fuel-price forecasts.

American also is seeing a shift in what it calls “blended” travel—the combination of a business trip with leisure. Historically, those were about 20 percent to 25 percent of trips “in the airline,” but for the past five to six months, “about 50 percent to 55 percent of trips in the airline have been blended, and as we look forward into the coming months that continues to be the case,” American chief commercial officer Vasu Raja said. “Those blended trips in the system are coming in at yields that are at 75 percent to 85 percent of what were true business-only trips, but they are coming through lower cost-of-sale channels and off of negotiated discounts, so the net yields of them are very often the best things in the system.”

Metrics and Outlook

The carrier reported $8.9 billion in first-quarter revenue, representing an 84 percent recovery compared with the first quarter of 2019. Of that figure, $7.8 billion was passenger revenue. American’s March sales set a monthly record, and it was the first month since the pandemic started that total revenue was above 2019 levels for the same period, according to the company. Still, the carrier reported a net loss of $1.6 billion for the quarter. 

Based on current demand assumptions, American expects total revenue to be 6 percent to 8 percent higher versus Q2 2019 on 6 percent to 8 percent lower capacity, American CFO Derek Kerr said. “That would be the first time we had produced total revenue greater than 2019 since the start of the pandemic,” he said. “If we hit the midpoint of this revenue guide, the results would be the highest quarterly revenue in the company’s history.”

Total capacity for the first quarter was down 10.7 percent compared to Q1 2019, according to American. Domestic capacity was down 7.5 percent and international capacity was 17.4 percent lower for the period compared with 2019, according to the company. The company expects full-year capacity to be 92 percent to 94 percent of 2019 levels, which is a reduction in its full-year outlook from prior guidance largely due to 787 delivery delays, Kerr said. 

Regional departures scheduled for the second quarter are down about 20 percent compared with 2019, while mainline departure are down about 5 percent, Kerr said. 

When asked about the ability to handle the summer demand, Isom noted that the company has hired more than 600 pilots and had hired about 20,000 new employees, but the net number is about 12,000. Still, “we are sizing the airline for the pilots we have … and those new team members are working in reservations, at airports, throughout the system, so we will be able to handle summer.”

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