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When looking at the Q1 2023 financial results posted by some of the largest airlines in the United States, one phrase comes to mind in terms of revenue: record-breaking. And yet, many of these carriers have been unable to post a profit during this period due to an industry-wide trend where costs have outweighed revenue, primarily caused by surging fuel prices.
While fuel prices have since come down and airlines are preparing for what is expected to be a great peak travel season, Q1 2023 results have been less positive than expected.
AeroTime reviews the figures to find out how well the US airline industry has performed – and which carrier is the biggest in terms of capacity.
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1. United Airlines’ rise to the top
While American Airlines can still boast that its fleet number is the biggest in the world, United Airlines has managed to offer slightly more capacity in Q1 2023. This made it the largest carrier in the US in terms of offered capacity in Q1 2023.
United noted that its Available Seat Miles (ASM) was 65.7 billion, with the airline carrying 36.8 million passengers during the first three months of the year and earning a total revenue of $11.42 billion. However, revenues were outweighed by operating costs, which were $11.47 billion, resulting in an operating loss of $43 million and a net loss, following non-operating expenses of $213 million, of $194 million.
However, in the company’s financial release CEO Scott Kirby said that he was “extremely proud of the United team’s performance”, which contributed to “an all-time high operating cash flow” of $3.1 billion. Free Cash Flow (FCF) was $1.29 billion during Q1 2023, and, in total, United Airlines had $8 billion in cash at the end of Q1 2023.
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At the end of the period, that airline had a total of 677 commitments to purchase aircraft, including an order for 100 Boeing 787 and 737 MAX aircraft finalized in December 2022. Most of these aircraft are scheduled to be delivered after 2024, including 92 787s and 210 737 MAXs, with the airline expecting to receive 114 Boeing 737 MAX and 12 Airbus A321neo aircraft in 2023, and eight 787s, 88 737 MAXs, and 31 A321neos in 2024.
In Q1 2023, United Airlines operated 891 mainline and 446 regional aircraft, totaling 1,337 jets in its fleet.
However, Airbus told United Airlines that eight A321neo aircraft will be delivered instead in 2024, and a further 10 will be delivered in 2025 instead of 2024.
Meanwhile, Boeing also notified the carrier about 737 MAX delivery delays. The manufacturer now expects to hand over 37 aircraft of the type to the carrier in 2024 rather than 2023 as was originally forecasted.
The airline estimates that a further 11 aircraft deliveries will be delayed by a year until 2024, and delivery of an additional 30 737 MAX aircraft will now take place in 2025 rather than 2024.
While revenues surged compared to Q1 2022, United Airlines still ended Q1 2023 with a net loss
United Airlines posts $194 million loss in Q1 2023 due to cost overruns
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2. American Airlines’ small profit
Out of the Big Four airlines in the United States – American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines – only a single company was profitable in Q1 2023.
American Airlines managed to eke out a small net profit of $10 million on the back of record-breaking revenues of $12.1 billion and FCF of $3 billion. Throughout the quarter, the airline, based at Dallas/Fort Worth International Airport (DFW), recorded 48.2 million passenger enplanements on a total of 1,464 aircraft in its mainline and regional fleet.
American Airlines operating costs were $11.7 billion, with the two largest expenses being fuel ($3.1 billion) and salaries, wages, and benefits ($3.281 billion). Another key issue for the airline is its debt, which peaked at $54 billion in Q2 2021. The company expects to reduce its liabilities to between $43 billion and $44 billion by the end of the year, improving its net debt to adjusted earnings before interest, tax, depreciation, amortization, and restructuring or rent (EBIDTAR) ratio from 6.7 at the end of 2022, to 4.5 in Q1 2023, and less than 4.5 by the end of 2023.
The 4.5 net debt/adjusted EBITDAR ratio is the lowest since 2019.
In total, capacity, measured in ASM was 65.0 billion, while Revenue Passenger Miles (RPM), measuring demand, was 52 billion with an average yield of 21.35 cents.
Comparatively, United Airlines RPM was 52.5 billion, with an average yield of 19.56 cents.
Robert Isom, the CEO of American Airlines, summarized that the airline “ran a great operation” and had delivered on its “financial guidance for the quarter, resulting in a first-quarter profit for the first time in four years”.
Looking ahead, American Airlines expects ASM to grow by between 3.5% and 5.5% in Q2 2023, and between 5% and 8% in 2023. Adjusted earnings per diluted share are estimated to be between $1.20 and $1.40 in the next quarter and $2.50 and $3.50 for the full year.
In Q1 2023, the adjusted earnings per diluted share was $0.02.
American Airlines became the only big four airline in the US to achieve a profit in Q1 2023
Was American Airlines the only profitable US airline in Q1 2023?
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3. Delta Air Lines building momentum
Despite record-breaking revenue Delta Air Lines ended the first quarter of the year with a net loss. However, the airline’s expectations for the next few months remain positive.
Glen Hauenstein, the President of Delta Air Lines said: “We delivered record March quarter revenue with total unit revenue that was 16 percent higher than the same period in 2019. These results reflect the strength in the underlying demand environment and continued momentum in premium products and loyalty revenue.”
Operating revenues, based on an average passenger yield per flown mile of 20.95 cents, were $12.7 billion, with operating costs of $13 billion overshadowing a momentous quarter for the carrier. Included in the final lines of Delta Air Lines’ Q1 2023 financial report were an operating loss of $277 million and a net loss of $363 million.
Its ASM was 61.3 billion, with RPM standing at 49.6 billion at the end of the first quarter of 2023.
322 aircraft are scheduled to join the airline’s fleet in the coming years, most of which will be manufactured by Airbus because Delta Air Lines has outstanding orders for 59 A220-300s, 130 A321neos, 17 A330-900neos, and 16 A350-900s. Boeing is scheduled to deliver 100 737 MAX-10 aircraft to the airline.
While the carrier has not provided an estimate of how many aircraft will be delivered in the next few years, it did indicate that its aircraft purchase commitments until 2027 and thereafter total $18.7 billion. As of March 31, 2023, Delta Air Lines said that it will spend $2.3 billion on new aircraft in the remaining nine months of 2023, growing to $4.4 billion in 2024 and $4.2 billion in 2025. In 2026 that sum will go down to $3.8 billion, and will drop to $2.5 billion in 2027, with the remaining $1.2 billion spent in the years following.
“With record advance bookings for the summer, we expect June quarter revenue to be 15 to 17 percent higher on capacity growth of 17 percent year over year,” Hauenstein added.
While it remains optimistic about its future prospects, Delta Air Lines began the quarter with a net loss of $363 million
Delta Air Lines begins 2023 with $363 million net loss
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4. Southwest Airlines reeling from the operational meltdown in 2022
At the end of 2022, Southwest Airlines became the focus of much discussion when it experienced a complete operational meltdown during the Holiday period in December 2022. As a result, mor than 16,700 flights were canceled, with the negative effects carrying over to Q1 2023.
According to Southwest Airlines CEO Bob Jordan, that had been expected and the net loss was a result of the “negative financial impact of approximately $380 million pre-tax, or $294 million after-tax, related to the December 2022 operational disruption”. Jordan also added that the operational meltdown had a negative revenue impact of around $325 million due to “cancellations of holiday return travel and a deceleration in bookings for January and February 2023 travel”.
However, with the airline carrying 30.2 million passengers, offering 38 billion ASM, 29.5 billion RPM, and average yields per RPM of 17.28 cents, Jordan noted that “travel demand and revenue trends in March 2023 were strong and resulted in solid profitability for the month and record first quarter revenues”.
The carrier ended Q1 2023 with operational revenues of $5.7 billion and operating costs of $5.9 billion, resulting in an operating loss of $284 million. Including other expenses, as well as benefits from income taxes, the airline’s net loss for the period was $159 million.
Southwest Airlines also highlighted that while it ended Q1 2023 with 793 aircraft, delivery delays at Boeing will result in the airline receiving 70 737 MAX-8 aircraft, 20 fewer than expected.
As a result, the airline noted that due to “the revision in aircraft deliveries and retirements” it now expects to “to end the year with 814 aircraft, compared with its previous guidance of 833 aircraft”.
Southwest Airlines is expecting to spend $2.3 billion on aircraft-related purchases in 2023
Southwest Airlines plans to spend $2.3 billion on new 737 MAX aircraft in 2023
AIRCRAFT AIRLINES AVIATION ECONOMICS & FINANCE
In mid-April 2023, Spirit AeroSystems notified Boeing about an irregular manufacturing procedure on certain 737 aircraft, except for the 737 MAX-9. The manufacturer later clarified that the related delivery delays would remove around 9,000 seats from airline schedules in the 2023 summer season, yet it reiterated its aim to deliver between 400 and 450 737 MAX aircraft in 2023.
While American Airlines only mentioned that it does not have any financial commitments in place for 10 737 MAX aircraft, United Airlines stated that the manufacturing defect could result in additional delays of six aircraft, with the possibility that the planemaker may inform customers of further delays down the line. Delta Air Lines’ 737 MAX-10 order should not be impacted, as the largest 737 MAX has still not been certified by the Federal Aviation Administration (FAA).
Boeing still expects to deliver between 400 and 450 737 MAX aircraft in Q1 2023
Boeing expects to deliver 400-450 B737 MAX in 2023 despite production problems
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5. JetBlue exploring new European horizons
JetBlue began the year by beating its own expectations, with the airline continuing to explore and announce new destinations in Europe, utilizing the increased range of the Airbus A321neoLR.
The airline earned $2.3 billion in revenue but with operating costs at $2.5 billion, and other expenses totaling $24 million, its net loss after income tax benefits was $192 million. Still, according to Robin Hayes, JetBlue’s CEO, the airline’s Q1 2023 results were better than expected and the airline is “forecasting strong sequential pre-tax margin improvement into the second quarter”.
“We remain well on track in executing our comprehensive plan to enhance our long-term profitability and restore our historical earnings power,” Hayes said, adding that in Q2 2023 the airline should see “strong revenue growth to continue as demand remains robust and as we see continued momentum from our commercial initiatives”.
During the first quarter of the year, the carrier announced flights to Paris Charles De Gaulle Airport (CDG) and added flights to Amsterdam Schiphol Airport (AMS) in April 2023 from its two East Coast hubs, New York John F. Kennedy International Airport (JFK) and Boston Logan International Airport (BOS). Both flights are set to begin during the summer of 2023.
The average yield per passenger mile at JetBlue was 16.31 cents. Capacity, namely ASM and demand in the form of RPM, were 16.7 billion and 13.3 billion, respectively. The airline carried 10.1 million passengers, operating 290 aircraft by the end of Q1 2023. JetBlue was contracted to receive 11 Airbus A321neo and 17 A220 aircraft throughout the year. However, the carrier noted that Airbus delays had forced it to assume delivery of 11 A220, four A321neo, and four A321neoLR aircraft in 2023.
“We made no flight equipment deposits for the three months ended March 31, 2023, as we work with Airbus to realign such payments to anticipated delivery delays,” JetBlue noted.
JetBlue provided an update on the timeline of its merger with Spirit Airlines
JetBlue anticipates merging with Spirit by H1 2024
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6. Alaska Airlines buying back its own stock
Alaska Airlines was another airline which, like many of its industry counterparts, registered revenue growth and had expected much from the future. However, it ended the first quarter of the year with a net loss.
The Seattle Tacoma International Airport (SEA)-based carrier also managed to buy back its own shares during the quarter, spending $18 million on share repurchases. The carrier expects to spend as much as $100 million on common stock buybacks by the end of 2023.
Alaska Airlines’ net loss was $142 million in Q1 2023. The company earned $2.1 billion in revenue but spent $2.3 billion on running its operations throughout the three months. While most of the expenses were non-fuel related, these items have only grown by 13% compared to Q1 2022.
Furthermore, the company had $537 million in cash at the end of the quarter compared, for example, to JetBlue’s $1.4 billion. This is despite Alaska Airlines having similar operational statistics, including 15.7 billion ASM and 12.5 billion RPM. Per mile yields were 15.80 cents for the 9.8 million passengers it carried during the period.
Its fleet at the end of the quarter included a mix of Boeing 737 aircraft, including the NextGeneration (NG), MAX and freighters as well as Embraer E175s, and totaled 294 aircraft. The carrier plans to add 40 additional aircraft throughout the year, including one 737-800F, three 737 MAX-8, 28 737 MAX-9, and eight E175s. The airline also noted that the expected delivery estimates already include the delivery delays communicated by Boeing, yet these are unrelated to the production problem that does not affect the 737 MAX-9.
Two Boeing 737-800 NG and 10 Airbus A321neo, the latter of which are the final remnants of a merger with of the merger with Virgin America, will leave Alaska Airlines’ fleet in 2023.
Despite a net loss of $142 million, Alaska Airlines still repurchased $18 million of its own stock
Alaska Airlines buys back stock worth $18 million despite Q1 2023 loss
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7. Spirit Airlines updates on merger with JetBlue
Although many airlines are optimistic about their future, Spirit Airlines is more reserved about the next few months. The airline stated that while it should achieve a positive profit margin, it will be in the single digits due to issues related to the Pratt & Whitney PW11000G engine powering the A320neo family of aircraft.
The issue, which has affected airlines across the globe, including the recent suspension of operations by India’s Go First, has continued to hamper Spirit Airlines.
According to the carrier’s Chief Financial Officer (CFO) Scott Haralson, in Q2 2023 the operating margin should be between 4.5% to 6.5%, but “in this demand environment, and with a declining fuel price in the second quarter of this year, the business at full utilization should be producing double digit operating margins”. The CFO pointed out that pilot attrition is also negatively affecting the airline’s operations, resulting in less than desirable aircraft utilization. Haralson added that the A320neo aircraft engine problems “will likely remain a drag on utilization for the rest of the year”.
Ending the quarter with a net loss of $103.9 million, Spirit Airlines earned $1.3 billion in revenue and spent $1.46 billion on operating expenses. Its ASM was 13.2 billion, while RPM was 10.6 billion with an average yield of 12.64 cents. On average the airline operated 194.8 aircraft daily. By the end of the quarter, it had 195 aircraft.
In terms of its merger with JetBlue, the low-cost carrier stated that it expects to complete the process by H1 2024, even though the US Department of Justice (DOJ) filed a suit to block the merger between the two airlines in March 2023. At the time Merrick Garland, the US Attorney General argued that the two airlines coming together would “result in higher fares and fewer choices for tens of millions of travelers, with the greatest impact felt by those who rely on what are known as ultra-low-cost carriers in order to fly.”
Spirit Airlines said that its expected double-digit operating margin is being hampered by A320neo engine issues
Spirit Airlines’ hopes of double-digit margins dashed by A320neo engine issues
AIRLINES AVIATION ECONOMICS & FINANCE
8. Frontier Airlines beginning to reshape its network following Spirit merger failure
Frontier Airlines almost made a profit during the quarter, with the low-cost carrier beginning to reshape its network in the face of changing market dynamics and after it was outbid when trying to acquire Spirit Airlines.
The airline posted a narrow $13 million net loss during the first three months of the year, earning revenues of $848 million that were less than the $873 million operating expenses in Q1 2023, which were offset by $4 million in tax benefits. Frontier noted in its Q1 2023 results release that one of those costs was a $1 million charge “related to the terminated merger with Spirit Airlines, Inc. within transaction and merger-related costs”.
“Post-pandemic demand has increased due, in part, to work from home arrangements and flexible working schedules. We also see a change in passenger behavior with outsized demand on peak days and peak periods,” stated Barry Biffle, the President and CEO of Frontier Airlines.
Following an analysis of consumers’ new behavior, Frontier Airlines has begun to reshape its network in Q2 2023 to, Biffle added, “exploit this post-pandemic demand dynamic, and expect the changes to be fully deployed in the second half of 2023”.
And while capacity will be a reduced going forward, Biffle noted that its cost advantage “will widen further throughout the year, allowing Frontier to remain the lowest unit cost operator in the industry in spite of lower utilization on off-peak days and in off-peak periods”. The executive added that this will result in a pre-tax margin of between 7% and 10%, which would be the airline’s highest result post-pandemic.
With a fleet totaling 125 aircraft, Frontier Airlines had 8.7 billion ASM, 7.2 billion RPM, and carried 6.8 million passengers with an average of 121 operated aircraft in Q1 2023.
9. Hawaiian Airlines rising fuel bill blamed on A321neo
Like Spirit Airlines, Hawaiian Airlines is experiencing issues with its Airbus A321neo fleet, with the airline arguing that the A330s that replaced the grounded A321neo resulted in a much higher fuel bill.
The airline declared that its fuel consumption rose by 21.4% compared to Q1 2022 due to “higher capacity and inefficiencies resulting from these challenges”.
Capacity, measured in ASM, was 4.9 billion in Q1 2023, compared to 4.2 billion in Q1 2022. Meanwhile, demand was 3.8 billion RPM compared to 2.9 billion RPM in Q1 2022. The average yield was 14.27 cents, with Hawaiian Airlines operating 63 aircraft throughout the three-month period: 24 Airbus A330-200, 18 A321neo, 19 Boeing 717, and one each of ATR 42 and ATR 72 aircraft. While the carrier did not indicate how many A321neos were grounded, ch-aviation.com data shows that three out of the 18 aircraft of the type are currently under maintenance.
“Certain of our suppliers, including our supplier of engines for our A321neo aircraft, Pratt & Whitney, have experienced and continue to experience significant supply chain disruptions,” the airline noted in its Q1 2023 US Securities and Exchange Commission (SEC) filing.
While Hawaiian Airlines does not yet know the full extent of the impact on its operations, it anticipates “continued delays for Pratt & Whitney engines on our A321neo aircraft during 2023”.
The airline’s net loss for Q1 2023 was $98.2 million. The airline earned $621 million in revenue, while operating expenses were $730 million.
Hawaiian Airlines blames A321neo engine supply issues for its growing fuel bill
Hawaiian Airlines blames A321neo engine supply issues for rising fuel bill
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10. Allegiant Airlines ending the quarter profitably and beginning to switch to Boeing
The only other profitable airline, besides American Airlines, is Allegiant Airlines, with the small carrier posting a net profit for Q1 2023.
Allegiant Airlines ended Q1 2023 with a net profit of $56.1 million, with operating revenues of $649.6 million outweighing operating expenses that totaled $554.8 million in addition to other costs that set the company back $20.4 million.
“The team worked tirelessly to ensure operational integrity, and our controllable completion of 99.9 percent for the quarter is a testament to their efforts. Running a safe, reliable operation is a critical component to our success, and I could not be prouder of the team’s performance,” commented John Redmond, the CEO of Allegiant Travel Company, the parent company of Allegiant Airlines.
Capacity was 4.5 billion ASM (4.6 billion including non-scheduled services), while demand was 3.9 billion RPM, as the airline carried 4.1 million scheduled passengers throughout Q1 2023 with an average yield of 8.29 cents. The all-Airbus operator operated 124 aircraft by the end of the quarter, namely the A319ceo and A320ceo.
However, by Q4 2023 it expects to receive its first two Boeing 737 MAX aircraft. Allegiant Airlines ordered the rival product to the A320 family in December 2021, finalizing the order in January 2022. The airline’s then-CEO and current Chairman of the Board Maurice J. Gallagher, Jr. had argued that deliveries of new aircraft, which is a contrast to its all-second hand A320 family fleet, will bring numerous benefits, including “flexibility for capacity growth and aircraft retirements, significant environmental benefits, and modern configuration and cabin features our customers will appreciate.”
Confirmed: Allegiant Air orders up to 100 Boeing 737 MAXs
In summary, these are the top 10 airlines in the United States in terms of capacity, measured in ASM:
United Airlines (65.7 billion)
American Airlines (65 billion)
Delta Air Lines (61.3 billion)
Southwest Airlines (38 billion)
JetBlue (16.7 billion)
Alaska Airlines (15.7 billion)
Spirit Airlines (13.2 billion)
Frontier Airlines (8.7 billion)
Hawaiian Airlines (4.7 billion)
Allegiant Airlines (4.5 billion)
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Delta Air Lines