By Claudia Assis
American Airlines Group Inc. promised a return to profitability later this year as it sounded optimistic about leisure travel and tweaked capacity further than Wall Street expected.
American /zigman2/quotes/209207041/composite AAL +7.04% earlier Thursday reported a narrower-than-expected fourth-quarter loss and sales that were above expectations. The stock turned lower mid-session, however, with shares of United Airlines Holdings Inc. /zigman2/quotes/205037281/composite UAL +4.27% also down following that carrier’s late Wednesday results.
American Airlines’ executives said in a post-results call that they have started to see travel that combines leisure and business: People may find a tourism destination and travel there to stay and work remotely for weeks, blurring the lines between business and leisure travel.
Domestic flights “remained the relative source of strength for the airline,” Jefferies analyst Sheila Kahyaoglu said in a note Thursday. Passenger revenues fell 13% as compared with 2019, with domestic leisure travel down about 6% and domestic business down 31% as compared with a 37% drop for international travel, she said.
American’s full-year 2022 outlook pointing to capacity down 5% versus 2019 was below Jefferies’ estimate of a 3% decline, she said.
The results were a “mild (fourth-quarter) beat overshadowed by what appears to be price weakness and higher-than-expected (first-quarter) costs,” Citi analyst Stephen Trent said in his note.
American’s earnings follows Delta’s last week, with Delta /zigman2/quotes/200327741/composite DAL +4.53% reporting better-than-expected fourth-quarter results but also sounding cautious on first-quarter prospects due to the impact of omicron on air travel.
U.S. airlines have had a rough start of the year, with the emergence of omicron spooking would-be air travelers and laying up employees, with the variant and winter weather leading to thousands of cancelled flights in late December and early January.
The sector has kept its underperformance in relation to the broader index, with the U.S. Global JETS ETF /zigman2/quotes/207744796/composite JETS +3.91% down nearly 5% in the past 12 months, contrasting with gains of around 18% for the S&P 500 index. /zigman2/quotes/210599714/realtime SPX +2.39%