American, United Announce Strong Q1 Performance

Legacy carriers grew total profits in the billions despite mixed performance results.

Executives at American Airlines and United Airlines are celebrating increased profits to open 2016 while preparing for what is shaping to be a projected busy spring season. Each legacy carrier announced gross revenue in the multi-billions of dollars, despite the traditional lulls of the first quarter.

American announced their profits during a conference call on the morning of Friday, April 22. The airline turned a total gross profit of $9.4 billion in the first quarter of the year, for a pre-tax profit margin of 12.9 percent. The profit margin represented a record water mark for the Dallas-based carrier, which would be returned in part to the airline’s employees through a profit-sharing plan.

“These results include a $73 million accrual related to the system-wide profit sharing plan we announced earlier this quarter,” Doug Parker, chairman and chief executive of American, announced in a press release. “The people of American are doing an outstanding job of taking care of our customers and are the key to our future success.”

Although the profits were an overall increase, certain performance indicators were down compared to the first quarter of 2015. Total available seat miles increased by over three percent in the first quarter compared to last year, meaning fewer flyers were aboard each aircraft. Moreover, American was earning less per seat: Passenger revenue and consolidated passenger yield were both down over 7 percent when compared to 2015.

Reporting their overall earnings on Wednesday, April 20, United reported a similar balance sheet to open the year. The airline turned a total profit of $8.2 billion in the opening months of 2016, translating into an earnings-per-share of $1.23. The airline credited a strong American dollar and low fuel costs for their positive financial performance.

“I am extremely proud of United’s nearly 86,000 aviation professionals for their contributions to these strong results,” Oscar Munoz, president and chief executive officer of United Airlines. “As we accelerate United’s path forward, we will continue to focus on running a great airline today while innovating for tomorrow.”

Although the report indicated United was strong, the airline noted certain difficulties experienced in the first months of the year. In addition to a larger than predicted decrease in business travel, the airline also experienced a drop in travel around the Easter holiday and spring break season. This may have coincided with the terrorist attacks in Belgium, which took place during the week leading up to Easter.

Overall, each carrier’s profit was in line with each other, trailing Delta Air Lines’ announcement in the previous week. The airline announced a record first-quarter adjusted pre-tax profit of $1.56 billion, despite a drop in passengers and air miles.

The second quarter could also turn record-breaking profits for all three American legacy carriers, as industry trade group Airlines for America predicts over 140 million passengers will fly during Spring 2016. The projection reflects an increase of 63,000 flyers per day compared to the same period in 2015. However, potential hazards to passengers – including Zika virus and terrorist threats – could still affect the end profit.

[Photo: Getty]