American Airlines' business travel revenue is "fully recovered" compared with 2019, led by unmanaged or lightly managed accounts, as the carrier in the second quarter posted the highest quarterly revenue in its history, American reported Thursday.
Business revenue was 51 percent recovered for the month of January, but was 110 percent recovered for the month of June, according to an earnings presentation.
American produced second-quarter revenue of $13.4 billion, an increase of 12.2 percent versus the same period in 2019.
"That's a record for any quarter in our company's history," said American CEO Robert Isom on a Thursday earnings call. "These results were achieved while flying 8.5 percent less capacity than we did in 2019."
American reported second-quarter net income of $476 million, up from $19 million a year earlier and the first time since the pandemic's start the carrier posted a profit without U.S. government aid.
Revenue from small and midsize businesses as well as customers combining business and leisure were "continuing to outpace the recovery of our managed corporate revenue," Isom said. The majority of this revenue growth "has come directly through our website, bypassing traditional channels."
As much as 75 percent of American's revenue once was identified or self-classified in a binary way as business or leisure, but "now that's only 50 percent," American chief commercial officer Vasu Raja said.
Historically, revenue from trips identified as business comprise 40 percent to 45 percent of total revenue, Raja added. Of that business revenue, what American considers unmanaged or small businesses represent about 60 percent of revenue, with the rest generated by large corporations with managed travel programs.
The unmanaged business segment is between 125 percent and 130 percent recovered to 2019 levels, while contracted corporate business is about 75 percent to 80 percent recovered, Raja said.
"There's going to be more and more unmanaged business out there," he said, adding this has been a relatively durable trend and one that will continue. "Indeed, we see even with those accounts that are contracted corporate accounts, as we emerge from the pandemic, fewer and fewer of them are enforcing travel policies and are doing a lot of the things that they contracted to anyway."
Performance Metrics, Outlook
Second-quarter 2022 passenger revenue was $12.2 billion, up from $6.5 billion one year prior. Domestic capacity for the period was down 6.6 percent compared with the second quarter of 2019, while international capacity was down 12.1 percent.
American operated more than 500,000 flights the past quarter, an 8 percent year-over-year increase, with a load factor of 87 percent, which was 10 points higher than a year prior. The carrier had more than 53 million passengers in the quarter, according to the company.
While April and most of May were solid, American, like other carriers, faced operational difficulties from Memorial Day through June, with stronger than expected demand, and in June having "encountered significant weather on 27 of the 30 days," Isom said.
"Looking forward, we will limit capacity to the resources we have and the operating conditions we face," Isom said, adding, however, that on-time departures, on-time arrivals and its completion factor for the quarter were better than the second quarter of 2019.
Capacity guidance for Q3 is down 8 percent to 10 percent compared with 2019 and full-year 2022 is down 7.5 percent to 9.5 percent. Total revenue is expected to be up 10 percent to 12 percent for the third quarter versus 2019.
Average fuel costs for the second quarter were $4.03 per gallon and are expected to be between $3.73 and $3.78 per gallon for the third quarter.
During the quarter, American took delivery of five Airbus A321neo aircraft and reactivated nine Boeing 737-800s from long-term storage, said vice chair, CFO and president of American Eagle Derek Kerr. The company also launched a new business-class fare and its new Main Select fares, targeting corporate customers.
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