Whatâs Going On Here?Self-assured American Airlines reported better-than-expected quarterly results on Thursday. What Does This Mean?American Airlines confidently ramped up its forecast for its third-quarter results last week, and turns out it was right to get investors excited: the airline â one of the USâs biggest â boasted that it made 13% more revenue last quarter than at the same time in 2019, before the travel-stopping pandemic hit. Thatâs bragging rights in itself, so itâs even more impressive that American pulled that off while flying 10% fewer flights than it did back then, making up the difference (and more) by charging customers extra for their getaways. In fairness, the airline had to do something to cover fuel costs that had nearly doubled from the year before, and labor costs that were up 12% too. But it sure had cash left over: American swaggered away with almost half a billion dollars in profit, and investors only bolstered its self-belief by sending its shares up after the news. Why Should I Care?Zooming in: Empty executive lounges.
Americanâs rivals United Airlines and Delta Air Lines announced robust results of their own this month, so youâd think it was all smooth, uh, flying despite the economic slowdown. But while gleeful vacationers are keeping them happy, previously high-flying â literally and professionally â corporate customers have yet to swap video conferences for their pre-pandemic norm of business class flights. That corporate spending made up about a third of airlinesâ revenues â and even more of their profit â before Covid, but the Global Business Travel Association now doubts weâll see those levels again before 2026.
Zooming out: The American nightmare.
Airlines could still be bitten by an increasingly dire economy, mind you. The Federal Reserveâs âBeige Bookâ â basically a summary of how the central bank sees the economy â was released earlier this week, and it signaled intensifying worries of a recession following early Octoberâs âmodestâ and slowing US economic growth. | 