Despite Big Q1 Losses, U.S. Airlines Expect Profitable Second Quarters

While the first quarter presented numerous challenges for the big carriers, they have optimistic forecasts for the rest of the year.

Dallas and Chicago (AP) — American Airlines lost $1.64 billion in the first quarter, a wider loss than a year ago, but said Thursday that it expects to turn profitable in the spring as travel demand strengthens. The report comes a day after United Airlines' announcement that it lost $1.38 billion in the quarter, but the carrier holds a similarly rosy outlook for the next three months as post-pandemic travel ramps back up.

The airline's shares soared more than 10 percent higher in early trading before the market opened. That echoed United's shares jump of 8 percent following its earnings report.

Air travel was subdued early in the year by the Omicron variant causing an increase in Covid-19 cases, but passengers returned in March, and American said it earned a profit that month, excluding certain items.

American's revenue more than doubled from a year earlier, returning to 84 percent of the prepandemic level from early 2019. "The demand environment is very strong, and as a result, we expect to be profitable in the second quarter based on our current fuel price assumptions," new CEO Robert Isom said in a statement from the Fort Worth, Texas-based airline.

American said it is getting a boost from the easing of pandemic travel restrictions and improvement in business travel, which has been a weak point for airlines. The carrier added that corporate bookings were the highest since the start of the pandemic.

Along with higher revenue, however, airlines are facing higher costs for fuel and labor. American's fuel bill more than doubled from a year earlier, and payroll costs rose more than 15 percent. United's fuel costs were up more than 40 percent year-over-year.

All three of the largest U.S. carriers — American, Delta Air Lines and United Airlines — predicted they will earn full-year profits as travel continues to rebound from the depths of the pandemic.

The first quarter, however, was less rosy. It started with massive flight cancellations due to winter storms and high numbers of pilots and flight attendants out with Omicron. Cancellations decreased and revenue rose during the rest of the quarter, as the variant subsided.

"We continue to believe we will see a strong spring and lead in to summer as restrictions disappear and more people travel," said analysts at Cowen & Co., about United Airlines' prospects. "We believe if the U.S. testing mandate were to be eliminated, we would see strong pent-up demand for the summer on transatlantic routes."

American said that excluding special items it lost $2.32 a share, a slightly better result than the average forecast of an adjusted loss of $2.43 per share, according to a Zacks Investment Research survey of eight analysts.

Still, the loss was wider than American's $1.25 billion loss a year earlier. Revenue rose to $8.9 billion.

Through Wednesday, American Airlines Group shares had gained 8.5 percent since the beginning of the year. The stock has dropped slightly more than 4 percent in the last 12 months.

United's quarterly loss amounted to $4.24 a share and compared to a loss of $1.36 billion, or $4.29 a share, in the same period a year earlier. Analysts had been expecting a loss of $4.22 a share in the latest quarter, according to FactSet.

"The demand environment is the strongest it's been in my 30 years in the industry… we're now seeing clear evidence that the second quarter will be an historic inflection point for our business," Chicago-based United Airlines CEO Scott Kirby said in a statement.