Whatâs Going On Here?American Airlines announced better-than-expected results on Thursday, as the aviation industry finally wakes up to the brighter tomorrow itâs been waiting for. What Does This Mean?American Airlines has shaken off Omicron with aplomb, reporting that March was its first profitable month since last July, as well as the first month where revenue came in above pre-pandemic levels. Last quarterâs revenue, then, came in more than twice as high as it was the same time last year. This was partly down to the fact that business travel bookings â some of the companyâs most profitable flights â hit their highest level since Covid arrived, while international travel demand had picked up considerably by the end of the quarter too. American Airlines is now predicting itâll return to profit this quarter, which was all investors needed to hear: they initially sent its stock up 11%. Why Should I Care?For markets: Airline stocks are flying high.
American Airlinesâ promising forecast isnât a one-off: both United Airlines and Delta Air Lines have said in the past week that theyâre expecting to return to profit this year. Itâs an encouraging sign that the entire industry could finally be making a comeback after two years of restrictions and brushes with bankruptcy. That might be why an index tracking some of the worldsâ biggest airlines and plane manufacturers is up 15% in the past two weeks.
The bigger picture: Fail to prepare, prepare to fail.
Demand might finally be coming back, but there could be another bump in the runway in the form of blistering fuel costs. Case in point: American Airlinesâ fuel costs were 65% higher last quarter than they were the year before. In fact, every 1 cent increase in price per gallon is estimated to increase its annual costs by $40 million. And while some airlines lock down the price of fuel months in advance, American Airlines â along with Delta and United â hasnât, suggesting its profit could end up falling short. | 