Major US airlines all reported third quarter earnings in the past several weeks, and overall the news reveals results trending in a positive direction. However, while carriers have all trimmed losses or even posted modest profits, the industry still lags behind its record-setting benchmark year of 2019.
Alaska Airlines reported net income for the third quarter of 2021 of $194 million compared to a net loss of $431 million in the third quarter of 2020. The results translate to a net income of $1.53 per share, beating analysts’ consensus estimate for the quarter of $1.30 per share.
“We are thrilled to return to profitability this quarter, leading the industry with a 12 percent pretax profit margin,” said CEO Ben Minicucci on the airline’s third quarter call. “We’re all feeling the momentum and look forward to building on our strong foundation for growth in 2022 and beyond.”
Speaking on American’s third quarter earnings call, the airline’s president Robert Isom said the carrier expects a full rebound of business travel revenue to 2019 levels on a monthly basis by the end of 2022. Isom said in his regular conversations with top corporate customers, he found almost all have resumed domestic US business travel, to some extent.
As companies return to the office and lift travel restrictions, the carrier sees continued growth in corporate travel, with industrials, health care and professional services continuing to lead the recovery.
Long-haul international travel, particularly long-haul business travel, while the slowest to return, is starting to come back, according to Isom. Right now, almost two-thirds of corporate customers are traveling internationally, at least for essential business, and the airline expects international travel to improve significantly with the easing of cross-border requirements.
The airline posted a third quarter net loss of $642 million, excluding net special items, on $9 billion in revenue.
Delta Air Lines
Delta reported a third quarter profit of $1.2 billion on revenue of $9.15 billion, down about 19 percent from the same quarter in 2019. According to the carrier, the profit outlook should continue to recover through the end of this year.
According to the airline, domestic passengers led the recovery, posting revenue that was 72 percent of the benchmark September quarter 2019, a rise of 17 points over the June quarter 2021. International revenue recovered to 42 percent of third quarter 2019 levels, a 16 point improvement over June.
Passenger revenues on the carrier’s Latin American routes led 84 percent recovered, followed by transatlantic traffic, which rose 20 points quarter over quarter driven by border reopenings, but still only at 35 percent compared to the September quarter 2019. Pacific passenger revenue remains the slowest to return.
The carrier reported that premium cabins outperformed main cabin among the most recovered services, despite business travel being less than 50 percent recovered from 2019 levels. Corporate demand continued to improve, although below expectations as corporations delayed the reopening of offices due to the COVID-19 variant. With declining COVID-19 case counts, Delta saw improving domestic corporate volumes exiting September, and that improvement continues in October, with small and medium enterprises continue to lead the recovery in business travel.
“Our September quarter marked an important milestone in our recovery, with our first quarterly profit since the start of the pandemic,” said Ed Bastian, Delta’s chief executive officer. “Our revenues reached two-thirds of 2019 levels thanks to the industry-leading operational performance our people delivered through a busy summer.”
Southwest posted a 161.0 percent year-over-year increase in third quarter 2021 operating revenue over the same quarter last year, but still 17.0 percent below the third quarter 2019. Operating revenue for the airline rose to $4.7 billion.
However according to company leadership, the negative impact of the delta variant are estimated to have dropped August and September 2021 operating revenues by approximately $100 million and $200 million, respectively.
“Third quarter 2021 was a challenge for us, operationally,” Gary Kelly, chairman of the board and CEO, told analysts on the earnings call. “The net effect, including a revenue penalty of $300 million due to the COVID-19 surge, was a loss of $135 million, excluding special items.”
As far as the outlook for the airline’s fourth quarter 2021, Kelly said, “While there are lingering effects from the summer COVID-19 surge and recent operational challenges, we are encouraged with renewed momentum in leisure and business traffic, revenues, and bookings—especially over the holidays. Except for higher fuel prices, fourth quarter 2021’s overall results are trending better than third quarter 2021.”
It is worth noting that the third quarter results do not reflect the airline’s more recent operational woes that made headlines. Thousands of flights were delayed or canceled, grounding up to 30 percent of its capacity for several days in mid-October.
Chicago-based United saw a third quarter 2021 total operating revenue of $7.8 billion, down 31.9 percent compared to third quarter 2019, resulting in an adjusted net loss of $300 million. The airline cited the rise in premium leisure travel, the easing of restrictions at European borders and signs of a recovery of business travel as reasons for continued optimism.
The indicators have led the carrier to announce an increase international capacity by 10 percent in 2022, while holding domestic capacity at 2019 levels.
“From the return of business travel and the planned re-opening of Europe and early indications for opening in the Pacific, the headwinds we’ve faced are turning to tailwinds,” said United Airlines CEO Scott Kirby.
“The recovery was delayed by the delta variant, but the United team remains focused on our long-term vision – and not getting sidetracked by near-term volatility – meaning we’re solidly on track to achieve the targets we set for 2022,” Kirby added.