Tag Archives for earnings.
Delta’s latest earnings discussion revealed a major shift in attitude and planning around bringing back upgrades, slashing premium cabin perks that come from buying business class, and promising to eliminate Sky Club overcrowding within the next 18-24 months. There was a lot more packed into this earnigns call than there usually is!
Vice Chair and Chief Strategy Officer Steve Johnson said “If United is gaining share in Chicago they’re gaining it from someone other than us” and noted that they’ve been profitable in Chicago in the past, have been there for 99 years, and have a loyalty customer base – though concedes “we understand we’ll probably always be second place in Chicago.”
George W. Bush used to talk about the soft bigotry of low expectations. All I could think when American Airlines CEO went into his carrier’s fourth quarter earnings call oddly triumphant is that former Texas Governor Bush must have had the Texas-based airline in mind.
Delta’s vision is that they’re a premium, mostly non-union airline that pays employees well and negotiates hard with partners, suppliers and even customers. United’s vision is as the nation’s most global air carrier, an increasingly upgauged route network, and more premium seats than before.
On the other hand, American’s vision is cost cuts?
Delta Air Lines is earning half the industry’s profit. They had a 13.6% operating margin and made $1.3 billion in the last quarter. That’s great – except that both figures are down year-over-year and the airline lowered its guidance for the third quarter as well. Their stock lost 8% of its value at the open on Thursday’s morning’s announcement, though it gained half of that back by the end of the trading day.
The airline’s spin is that there’s too much capacity, and the problem is other airlines, but the industry is correcting itself. In other words, the problem isn’t Delta, and going forward Delta won’t have a problem. I don’t think this actually makes sense.
United Airlines has seemed to struggle. After a number of high profile incidents, the FAA if auditing safety practices. They’re unable to open up flights to new cities, and have had to defer already-announced service.
And winter is always a struggle to begin with. Delta barely eked out a profit.
I like to call out the things that struck me as most interesting, both from official remarks and from answers to analyst and reporter questions – the things that give me greater insight into the airline.
Here are (8) things that stood out to me in the American Airlines fourth quarter earnings call on Thursday morning.
American Airlines earned just $19 million in the fourth quarter and expects to lose money in the first quarter. Both are above analyst expectations. However their first quarter loss (historically the weakest period for a U.S. airline) doesn’t have United’s excuse of the Boeing 737 MAX 9 grounding.
They’re in a bit of a pickle because they don’t have the financial strength and performance to absorb higher labor costs, and may be tempted to squeeze elsewhere. But this constrains revenue growth potential, and makes for an even bigger problem. As a high cost airline they also need to be a high revenue airline, which means offering a better product not just a reliable domestic schedule.
The airline’s 2022 results are an improvement, though they’re making less money than Delta or United, but their results are also a bit overclaimed. American notes “Record fourth-quarter revenue of $13.2 billion, which represents a 16.6% increase over the same period in 2019” of course inflation since 2019 is… 16%.
Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel -- a topic he has covered since 2002.
Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »
