American and United airlines return to profitability

But the good news for airline investors was bad news for airline passengers.

The amount passengers paid to fly each mile on the airlines in the quarter was up just over 20% compared to 2019, by far the highest per-mile fares paid since the start of the pandemic. The spike was driven by a combination of less capacity across the industry and strong demand for air travel.

Those high fares allowed the airlines to lift revenue above what they booked in the same quarter of 2019, despite the reduced capacity.

American posted record second quarter revenue of $13.4 billion, up 12% from 2019 levels, even though capacity was down nearly 9%. Revenue at United was up 6% compared to the same period of 2019, with capacity down 15%.

The surging revenue fueled the carriers’ return to profitability.

American earned $533 million in the quarter excluding special items, matching the forecasts of analysts surveyed by Refinitiv. That compares to a $1.1 billion loss a year ago, but is well short of the $810 million the airline earned in the same period of 2019, a year ahead of the pandemic.

United earned $471 million in the second quarter on that basis, compared to the $1.3 billion it lost in the year-prior period. That profit was less than half what the airline earned in the second quarter of 2019. Unlike American, United fell short of analysts’ forecasts.

Among the reasons that profits couldn’t match the strong revenue was higher costs, especially soaring fuel prices. Fuel is the second largest expense for airlines after labor costs.

Both airlines paid more than $4 a gallon for jet fuel in the period, nearly double what they were paying in 2019, and up more than 70% from what each paid at the end of 2021.

Although there have been quarters during the pandemic when the airlines reported a positive net income, that was primarily due to financial support they and the rest of the industry received from the federal government during the last two years.

Excluding those payments, American had lost $16.4 billion from the start of 2020 through the first quarter of this year, while United lost $13.6 billion during the same period.

Shares of American (AAL) were slightly lower in premarket trading on the report, while United (UAL) shares fell 6% on its earnings miss.

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