And both airlines expect to return to profitability in the second quarter, despite significantly higher fuel prices. Fuel is the second largest cost for airlines after employee compensation.
And revenues are about to get much, much stronger.
“In March, we saw what’s possible,” said Robert Isom, American’s new CEO. “With surging demand brought on by reduced infection rates, relaxed restrictions and tremendous pent-up demand for people to travel, demand is as strong as we’ve ever seen it.”
Sales are taking off again
Late Wednesday, United reported a loss of $1.4 billion in the first quarter, about $1 billion less than the loss it reported in the same period a year ago after special items, such as federal financial support, are excluded.
On Thursday, American also reported a loss of $1.5 billion, about $1.2 billion less than a year ago. The airline said it was profitable in March, and that those profits should continue through the second quarter.
Both American and United reported that first quarter revenue more than doubled compared to a year ago. American’s revenue rose 122% to $8.9 billion, and United’s was up 135% to $7.6 billion.
The second quarter, which starts with the spring travel season and ends with summer travel in full force, is expected to be much better.
The airlines’ first-quarter revenue was still below the same period of 2019. But it was a very strong result given that there were still restrictions on international travel and business travel has not fully returned.
American estimates that corporate business travel was still only half of what it was before the pandemic, although it says bookings show that is rapidly improving as more companies reopen offices. Isom said overall business travel is forecast to reach 90% of pre-pandemic levels in the second quarter.
Both airlines are flying at a lower capacity than they did before the pandemic because international and business travel haven’t bounced back fully. They’re also operating with less staff, and it takes time to hire back qualified pilots and flight attendants.
Fuller planes, higher airfares
The average per-mile airfare on United and American is about the same as it was in the first quarter of 2019.
Since business and international travel is still lagging, having overall average fares close to 2019 levels means that domestic leisure travelers are paying more than they did, on average, before the pandemic.
One reason revenue is expected to be so strong in the second quarter is leisure travelers looking to book trips later in the year, before fares go any higher.