American Airlines announced its fourth quarter earnings this morning and held its earnings call.
Pre-tax earnings were up $90 million in the fourth quarter. AAdvantage revenue was up about $40 million during the quarter. Some key data points that let us break apart flying from non-flying performance.
- Passenger Revenue Per Available Seat Mile (PRASM): 14.72 cents
- Cost Per Available Seat Mile (CASM): 15.06
- Cargo Revenue: $216 million
On 51.675 billion revenue passenger miles, passenger revenue failed to cover $176 million of American Airlines costs for the quarter but passenger revenue and cargo together combined for a $40 million profit – basically break-even on $11 billion in revenue. Once again it’s AAdvantage that drove American’s profit but to their credit they didn’t actually lose money flying airplanes in the fourth quarter.
During the call Senior Vice President Don Casey noted that this is the last quarter where American gets a boost from changes resulting from frequent flyer accounting changes.
Here’s how American explains their full year results to employees:
During the earnings call American reported on AAdvantage:
- Largest number of new members since the merger
- Record number of co-brand cardmembers
- Record card acquisition
- Record card spend
- Record award redemptions
We know from past disclosures by American that most redemptions (85%) are domestic, and more redemptions are for economy. American’s frustrating revenue-based redemptions, that lop off value from the top end of the program, likely do help redemptions for members not looking for much value out of their miles.
I expect that record acquisition is a function of the record public initial offers that have been in the market. More acquisition is going to mean more cardmemnbers, holding cancellations constant. And redemptions have been up over the past two years as American has made the miles eligible to use on low dollar tickets.