JammyBritton27
Topic Author
Posts: 63
Joined: Wed Oct 11, 2017 2:28 pm

AA Q2 2018 earnings

Thu Jul 26, 2018 12:10 pm

Revenue up 3.7%
Pre-tax profit down 45% to $769 million, or $1.0 billion excluding net special items; net profit of $566 million, or $757 million excluding net special items
Fuel expenses up nearly 40%
"Because fuel expenses are expected to increase by more than $2 billion this year, we expect 2018 earnings to be lower than last year."
Cuts capacity guidance for 3Q and 4Q

https://news.alphastreet.com/american-a ... r-q2-2018/

Announced changes to Basic Economy so that beginning on September 5, it will include both a personal item and a carry-on bag like other Main Cabin fares
Announced deferral of 22 Airbus A321neo deliveries from 2019, 2020 and 2021, lowering aircraft capital expenditures for those years
Company release: http://news.aa.com/news/news-details/20 ... fault.aspx
 
tphuang
Posts: 3223
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 12:18 pm

This might be the lowest margin this quarter.

Here is what I found really interesting from https://americanairlines.gcs-web.com/st ... 185e9f20d9

domestic RASM up 0.3%
Latam RASM up 4.6%
TATL RASM up 6.2%
TPAC RASM up 3.6%

definitely show the same regional trend as UA/DL, except that they did 3 to 4% worse in each region than other legacies.
 
User avatar
gatibosgru
Posts: 1570
Joined: Thu Oct 18, 2007 2:48 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 12:30 pm

JammyBritton27 wrote:
Announced changes to Basic Economy so that beginning on September 5, it will include both a personal item and a carry-on bag like other Main Cabin fares


So that just means less Advantage Miles earned (or none) and no seat selection?
@DadCelo
 
PRAirbus
Posts: 727
Joined: Wed Apr 20, 2005 11:59 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 12:57 pm

Great to see the 767 fleet dwindling! Good riddance, they need to go away soon! (6) leaving this year and last (5) in 2020; 18 active in 2019.
 
miaami
Posts: 906
Joined: Thu Jul 12, 2007 2:27 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 1:05 pm

I didn't see any updates on when the MD80 fleet will finally be retired.
 
tphuang
Posts: 3223
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 1:14 pm

Robert Isom just said they will focus growth in 2019 at CLT and DFW and to a lesser extent ORD. While funding these growth by moving less profitable flying from other part of network.

I'm expecting more cuts at NYC and maybe PHX.
 
TWFlyGuy
Posts: 399
Joined: Mon Apr 17, 2017 5:10 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 2:41 pm

CLT makes sense given new gates. Glad to see some ORD growth. NYC strategy going forward will be interesting.
 
chrisp390
Posts: 689
Joined: Fri May 16, 2014 6:37 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 2:48 pm

Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.
 
boeingguy1
Posts: 415
Joined: Mon Jan 02, 2006 4:31 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:00 pm

If anyone has listened to the conference call, some of the analysts are (rightly) pressing Parker & Co. on their optimism that AA can continue to grow at forecasted rates, and especially hammered Parker hard on their massive balance sheet (debt), operational issues (excluding the PSA issues) from gate agents, call centers, flight attendants, baggage, customer complaints... they have a lot of work to do.

One analyst hit the nail on the head: DL is the perennial leader, UA has (surprisingly) moved to silver and AA is sitting on bronze wondering what happened.

EDIT: Just finished the entire recording. Parker seemed very frustrated (or flustered?) at some of the analyst's questions.
Last edited by boeingguy1 on Thu Jul 26, 2018 3:08 pm, edited 2 times in total.
"...Gatwick South!? Id rather crash in Brighton!"
 
UpNAWAy
Posts: 526
Joined: Thu Aug 11, 2016 12:42 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:03 pm

The balance sheet stuff is just dumb. They are buying all new aircraft. The should just consider it rent not debt. It is not a concern at all.
 
boeingguy1
Posts: 415
Joined: Mon Jan 02, 2006 4:31 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:06 pm

UpNAWAy wrote:
The balance sheet stuff is just dumb. They are buying all new aircraft. The should just consider it rent not debt. It is not a concern at all.


I'm interested as to why you characterize this as dumb. It adds a massive amount of interest to their operating expenses, leaving them with less cash to invest in other areas. Additionally, it puts a huge blocker from a flexibility perspective when the economy hits the next bump in the road.
"...Gatwick South!? Id rather crash in Brighton!"
 
MIflyer12
Posts: 5827
Joined: Mon Feb 18, 2013 11:58 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:17 pm

chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


Yeh, they ought to abandon the 10th largest domestic O&D market in the country. That would be smart. :( There's more domestic O&D at PHX than DFW.
 
HPAEAA
Posts: 1114
Joined: Mon May 08, 2006 7:24 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:17 pm

JammyBritton27 wrote:
Revenue up 3.7%
Pre-tax profit down 45% to $769 million, or $1.0 billion excluding net special items; net profit of $566 million, or $757 million excluding net special items
Fuel expenses up nearly 40%
"Because fuel expenses are expected to increase by more than $2 billion this year, we expect 2018 earnings to be lower than last year."
Cuts capacity guidance for 3Q and 4Q

https://news.alphastreet.com/american-a ... r-q2-2018/

Announced changes to Basic Economy so that beginning on September 5, it will include both a personal item and a carry-on bag like other Main Cabin fares
Announced deferral of 22 Airbus A321neo deliveries from 2019, 2020 and 2021, lowering aircraft capital expenditures for those years
Company release: http://news.aa.com/news/news-details/20 ... fault.aspx


Did they say anything about when the 321 deliveries are being deferred too? Nice side effect is they can wait & see what Boeing comes up with for the 797 program and potentially reshuffle the order book.
1.4mm and counting...
 
ozark1
Posts: 825
Joined: Fri Mar 03, 2006 4:38 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:30 pm

Just when we thought we hand put a fix on enough overhead bin space, now Basic gets to bring on a rollerboard as well. since Group 9 started i noticed a dramatic drop in incidents of having to yank luggage off to be checked, but it appears it will be a free for all once again. oh well
 
JetBlueCLT
Posts: 412
Joined: Tue Oct 22, 2013 6:55 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:41 pm

Just a matter of time before AA starts expanding more at CLT. With them picking up 7 gates on the A concourse. Will give them much needed room to grow.
Pittsburgh Penguins, Steelers, Pirates and Charlotte Hornets Fan
 
ScottB
Posts: 6641
Joined: Fri Jul 28, 2000 1:25 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:41 pm

UpNAWAy wrote:
The balance sheet stuff is just dumb. They are buying all new aircraft. The should just consider it rent not debt. It is not a concern at all.


It's not dumb at all. The rent and/or mortgages on the planes have to be paid whether the economy is good or bad, and at some point there will be a recession. It wouldn't be unprecedented for yield/RASM to drop by 10% or more in a recession, and if that were to happen, AA would flip to losing hundreds of millions a quarter. That's not a great position to be in when you're sitting on $53 billion in debt and liabilities and usually that debt has covenants regarding cash flow/cash position.

MIflyer12 wrote:
Yeh, they ought to abandon the 10th largest domestic O&D market in the country.


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.
 
MIflyer12
Posts: 5827
Joined: Mon Feb 18, 2013 11:58 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:57 pm

ScottB wrote:
MIflyer12 wrote:
Yeh, they ought to abandon the 10th largest domestic O&D market in the country.


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.


Come on, you're arguing a hypothetical. Has AA ever said that PHX loses money? Have they argued it's their least-profitable hub? Some markets are big enough that you need to be in them in a significant fashion. Relocating to LAX is a canard - there isn't, and won't be, sufficient capacity to expand at LAX. PHX is AA's best option in the west. Are you going to argue that AA should give up in LGA because they can't match Delta's scale?
 
a/c dxer
Posts: 415
Joined: Tue Aug 28, 2001 10:52 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 3:58 pm

I'm surprised they are paying a dividend. Understand they have for awhile. but AA really should use to fix there finances.
 
9w748capt
Posts: 1642
Joined: Sat Feb 02, 2008 10:27 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:03 pm

Oh geez - what kind of cuts can we expect? Snacking the entire catering operation UA styles? Even more abysmal award availability (as if that's even possible)? No wonder the sign-up bonus for the Citi Exec card is back up to 75K miles. Clearly AA isn't getting the results they want. Dougie, you have no one but yourself to blame for this.
 
TWFlyGuy
Posts: 399
Joined: Mon Apr 17, 2017 5:10 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:04 pm

a/c dxer wrote:
I'm surprised they are paying a dividend. Understand they have for awhile. but AA really should use to fix there finances.


I would imagine that would hurt their stock price considerably.
 
User avatar
cathay747
Posts: 1115
Joined: Sun Nov 23, 2003 8:47 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:04 pm

MIflyer12 wrote:
chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


Yeh, they ought to abandon the 10th largest domestic O&D market in the country. That would be smart. :( There's more domestic O&D at PHX than DFW.


Exactly. I just don't understand the never-ending nonsense about closing down PHX as a hub. This has been TALKED/DEBATED TO DEATH in these forums for YEARS...MOVE ON! IT ISN'T HAPPENING! For multiple reasons, not least of which being that it's PROFITABLE.
Try a Little VC-10derness
 
ericm2031
Posts: 1083
Joined: Tue Jun 19, 2012 8:46 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:07 pm

chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


DFW is too far for much of the West Coast if they are flying to somewhere else on the West Coast and would cause a lot of backtracking. LAX can't absorb anything. A lot of cities in the West rely exclusively (or almost exclusively) on PHX as they aren't priority for LAX gates.

If they had unlimited LAX gates, then yes, they could probably make it work. Other than that, it'd be very difficult to do so and they would lose a large PHX FF base and a lot of West Coast customers.
 
User avatar
cathay747
Posts: 1115
Joined: Sun Nov 23, 2003 8:47 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:10 pm

ScottB wrote:
MIflyer12 wrote:
Yeh, they ought to abandon the 10th largest domestic O&D market in the country.


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.


I'd be interested to know where you are getting all this info. PHX is not "problematic", and AA IS the dominant carrier at PHX by just about any measure you care to employ. And G4 is of no concern to AA...they are a mere fly buzzing around a horse.
Try a Little VC-10derness
 
tphuang
Posts: 3223
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:35 pm

MIflyer12 wrote:
ScottB wrote:
MIflyer12 wrote:
Yeh, they ought to abandon the 10th largest domestic O&D market in the country.


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.


Come on, you're arguing a hypothetical. Has AA ever said that PHX loses money? Have they argued it's their least-profitable hub? Some markets are big enough that you need to be in them in a significant fashion. Relocating to LAX is a canard - there isn't, and won't be, sufficient capacity to expand at LAX. PHX is AA's best option in the west. Are you going to argue that AA should give up in LGA because they can't match Delta's scale?


AA's pre-tax margin here is 5.6%. CLT and DFW are clearly far and away their most profitable hubs. PHL and MIA are likely more profitable than PHX given AA's dominance there. They have over 50% market share at DCA. Their probably below average in profit at ORD. At this point, PHX looks like at best their 6th most profitable hubs and probably well below average in margin considering how CLT/DFW outweighs in profitability compared to other stations.

They are clearly not retreating at ORD given their statements. They are not retreating at LAX with all the investment they put in. They won't give away slots to other people at DCA and LGA. So they are going to cut from remaining hubs. What does that leave us? JFK most likely and other than that PHX. PHL and MIA just got new flights, so those are not likely to get drawn down.
 
User avatar
cathay747
Posts: 1115
Joined: Sun Nov 23, 2003 8:47 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:40 pm

ericm2031 wrote:
chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


DFW is too far for much of the West Coast if they are flying to somewhere else on the West Coast and would cause a lot of backtracking. LAX can't absorb anything. A lot of cities in the West rely exclusively (or almost exclusively) on PHX as they aren't priority for LAX gates.

If they had unlimited LAX gates, then yes, they could probably make it work. Other than that, it'd be very difficult to do so and they would lose a large PHX FF base and a lot of West Coast customers.


BINGO! Two big reasons why PHX fulfills a needed role in the AA network...reasons which have been pointed out time-out-of-mind in these forums. Face it folks...the bottom line is that if the PHX hub wasn't profitable, AA would de-hub it faster than I am able to type this post.
Try a Little VC-10derness
 
User avatar
cathay747
Posts: 1115
Joined: Sun Nov 23, 2003 8:47 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 4:45 pm

tphuang wrote:

AA's pre-tax margin here is 5.6%. CLT and DFW are clearly far and away their most profitable hubs. PHL and MIA are likely more profitable than PHX given AA's dominance there. They have over 50% market share at DCA. Their probably below average in profit at ORD. At this point, PHX looks like at best their 6th most profitable hubs and probably well below average in margin considering how CLT/DFW outweighs in profitability compared to other stations.

They are clearly not retreating at ORD given their statements. They are not retreating at LAX with all the investment they put in. They won't give away slots to other people at DCA and LGA. So they are going to cut from remaining hubs. What does that leave us? JFK most likely and other than that PHX. PHL and MIA just got new flights, so those are not likely to get drawn down.


Who's talking about cuts??? AA has done some tweaking here at PHX, but overall have added some service over the past year or two.
Try a Little VC-10derness
 
Swadian
Posts: 539
Joined: Sun Sep 11, 2016 4:56 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:03 pm

boeingguy1 wrote:
UpNAWAy wrote:
The balance sheet stuff is just dumb. They are buying all new aircraft. The should just consider it rent not debt. It is not a concern at all.


I'm interested as to why you characterize this as dumb. It adds a massive amount of interest to their operating expenses, leaving them with less cash to invest in other areas. Additionally, it puts a huge blocker from a flexibility perspective when the economy hits the next bump in the road.


It's why AA is deferring 737-8MAX and A321neo aircraft and keeping the 77E indefinitely.

9w748capt wrote:
Oh geez - what kind of cuts can we expect? Snacking the entire catering operation UA styles? Even more abysmal award availability (as if that's even possible)? No wonder the sign-up bonus for the Citi Exec card is back up to 75K miles. Clearly AA isn't getting the results they want. Dougie, you have no one but yourself to blame for this.


If AA cuts any capacity at all it's going to be deploying smaller aircraft across the board.
 
User avatar
tlecam
Posts: 1446
Joined: Tue Jul 23, 2013 1:38 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:12 pm

cathay747 wrote:
tphuang wrote:

AA's pre-tax margin here is 5.6%. CLT and DFW are clearly far and away their most profitable hubs. PHL and MIA are likely more profitable than PHX given AA's dominance there. They have over 50% market share at DCA. Their probably below average in profit at ORD. At this point, PHX looks like at best their 6th most profitable hubs and probably well below average in margin considering how CLT/DFW outweighs in profitability compared to other stations.

They are clearly not retreating at ORD given their statements. They are not retreating at LAX with all the investment they put in. They won't give away slots to other people at DCA and LGA. So they are going to cut from remaining hubs. What does that leave us? JFK most likely and other than that PHX. PHL and MIA just got new flights, so those are not likely to get drawn down.


Who's talking about cuts??? AA has done some tweaking here at PHX, but overall have added some service over the past year or two.


THey talked on the earnings call about reducing domestic capacity (aka cuts) and "shifting unprofitable flying".
BOS-LGA-JFK | A:319/20/21, 332/3, 346 || B:717, 735, 737, 738, 739, 752, 753, 762, 763, 764, 787, 772, 744 || MD80, MD90
 
9w748capt
Posts: 1642
Joined: Sat Feb 02, 2008 10:27 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:23 pm

9w748capt wrote:
Oh geez - what kind of cuts can we expect? Snacking the entire catering operation UA styles? Even more abysmal award availability (as if that's even possible)? No wonder the sign-up bonus for the Citi Exec card is back up to 75K miles. Clearly AA isn't getting the results they want. Dougie, you have no one but yourself to blame for this.



I'm referring to cuts to the onboard product, not capacity.
 
TWFlyGuy
Posts: 399
Joined: Mon Apr 17, 2017 5:10 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:25 pm

cathay747 wrote:
MIflyer12 wrote:
chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


Yeh, they ought to abandon the 10th largest domestic O&D market in the country. That would be smart. :( There's more domestic O&D at PHX than DFW.


Exactly. I just don't understand the never-ending nonsense about closing down PHX as a hub. This has been TALKED/DEBATED TO DEATH in these forums for YEARS...MOVE ON! IT ISN'T HAPPENING! For multiple reasons, not least of which being that it's PROFITABLE.


Another advantage PHX has is relatively low cost much like CLT. The below link is 2015 data but likely hasn't changed drastically and you can see PHX is at $6.13 vs. DFW @ $11.28. That variance allows a carrier, AA in this case to take a pax on the lowest fares and fly them through PHX to get the best margin on that ticket thereby opening the seat(s) for a higher paying pax either local or connecting.

https://dwuconsulting.com/airport-finan ... -passenger
 
User avatar
OA412
Moderator
Posts: 4678
Joined: Thu Dec 28, 2000 6:22 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:30 pm

cathay747 wrote:
ScottB wrote:
MIflyer12 wrote:
Yeh, they ought to abandon the 10th largest domestic O&D market in the country.


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.


I'd be interested to know where you are getting all this info. PHX is not "problematic", and AA IS the dominant carrier at PHX by just about any measure you care to employ. And G4 is of no concern to AA...they are a mere fly buzzing around a horse.

Indeed, per numbers published by PHX, AA is larger in number of passengers carried at PHX than WN. In 2017, AA (including regional carriers) carried 20.3 million passengers compares to WNs 14.8 million. I can't speak to the revenue numbers, but in terms of overall passenger numbers, AA is larger than WN at PHX.
Hughes Airwest - Top Banana In The West
 
danj555
Posts: 225
Joined: Tue Jul 23, 2013 7:16 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:52 pm

Well using simple math reveals how much the per unit cost of a321neo planes are. If they save 1.2bn by deferring 22 aircraft. Its ~55m per plane. Thats like 60% list prices. interesting.
 
Osubuckeyes
Posts: 1830
Joined: Mon Mar 01, 2004 10:05 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 5:54 pm

Most of AA's capacity at PHX is strong O&D markets, and AA hubs... I believe PHX-Cali/Hubs make up about ~150 or so of the daily flights. I have a hard time imagining there is a significant amount AA can cut without being detrimental to the overall operation. Additionally, since the merger AA has actually added some West Coast/Rocky Mountain markets to add to the PHX portfolio. Lastly, I have to believe any significant AA cuts would be fairly quickly back filled by WN or others.
 
alasizon
Posts: 1936
Joined: Sat Apr 28, 2007 8:57 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 6:24 pm

tlecam wrote:
cathay747 wrote:
tphuang wrote:

AA's pre-tax margin here is 5.6%. CLT and DFW are clearly far and away their most profitable hubs. PHL and MIA are likely more profitable than PHX given AA's dominance there. They have over 50% market share at DCA. Their probably below average in profit at ORD. At this point, PHX looks like at best their 6th most profitable hubs and probably well below average in margin considering how CLT/DFW outweighs in profitability compared to other stations.

They are clearly not retreating at ORD given their statements. They are not retreating at LAX with all the investment they put in. They won't give away slots to other people at DCA and LGA. So they are going to cut from remaining hubs. What does that leave us? JFK most likely and other than that PHX. PHL and MIA just got new flights, so those are not likely to get drawn down.


Who's talking about cuts??? AA has done some tweaking here at PHX, but overall have added some service over the past year or two.


THey talked on the earnings call about reducing domestic capacity (aka cuts) and "shifting unprofitable flying".


The last question of the call from FlightGlobal addressed this that it was going to be utilization flying that would be cut (of which there is limited outside of PHL & DFW) and that the other hubs would not see much of an impact. The gates that are being picked up in DFW are Regional gates which means you can expect most of it to be Regional Growth that can be driven from better routing as well as better cross-fleeting between DFW & PHX/ORD (Skywest will be able to have a far more efficient network using the same number of planes). My guess for CLT is we will see additional 737 capacity added which is currently limited due to gate limitations as well as maybe a few more 319s moving from PHX to CLT (markets like BOI and IAH have already made the jump to mostly Regional and LF was up in both of those markets quite dramatically).
Manager on Duty & Tower Planner
 
mfe777
Posts: 284
Joined: Fri Jun 26, 2009 5:35 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 6:41 pm

MIflyer12 wrote:
chrisp390 wrote:
There's more domestic O&D at PHX than DFW.


Where are you getting that figure from, and are you making sure to add in O&D numbers from Love Field? DFW+DAL equal the domestic O&D demand from the DFW area.... and I highly, highly doubt that PHX beats the Dallas/Ft. Worth area on domestic O&D. I would also wager that premium cabin demand is less in PHX with DFW being a large business market. Not to mention, why exclude international O&D demand from the PHX vs DFW hub conversation, and the domestic and international networks complement and strengthen each other?
 
PlanesNTrains
Posts: 9526
Joined: Tue Feb 01, 2005 4:19 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 6:51 pm

mfe777 wrote:
MIflyer12 wrote:
chrisp390 wrote:
There's more domestic O&D at PHX than DFW.


Where are you getting that figure from, and are you making sure to add in O&D numbers from Love Field? DFW+DAL equal the domestic O&D demand from the DFW area.... and I highly, highly doubt that PHX beats the Dallas/Ft. Worth area on domestic O&D. I would also wager that premium cabin demand is less in PHX with DFW being a large business market. Not to mention, why exclude international O&D demand from the PHX vs DFW hub conversation, and the domestic and international networks complement and strengthen each other?


I took it as being AA-specific at DFW vs PHX.
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
Austin787
Posts: 388
Joined: Fri Jun 17, 2016 11:39 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 7:44 pm

boeingguy1 wrote:
If anyone has listened to the conference call, some of the analysts are (rightly) pressing Parker & Co. on their optimism that AA can continue to grow at forecasted rates, and especially hammered Parker hard on their massive balance sheet (debt), operational issues (excluding the PSA issues) from gate agents, call centers, flight attendants, baggage, customer complaints... they have a lot of work to do.

One analyst hit the nail on the head: DL is the perennial leader, UA has (surprisingly) moved to silver and AA is sitting on bronze wondering what happened.

EDIT: Just finished the entire recording. Parker seemed very frustrated (or flustered?) at some of the analyst's questions.

Parker made a big mess at AA, and has AA set to return to bankruptcy in the next downturn. But I doubt Parker cares, as he probably jumps ship after filing Chapter 11, and leave someone else to clean up his mess. Parker is making Jeff Smisek look like a genius.
 
AZLiam
Posts: 12
Joined: Sat Oct 07, 2017 12:46 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 7:59 pm

The airline is beginning to study where planes should be redeployed to those hubs from underperforming routes, Isom said.

“It won’t have a material impact on the hubs outside of DFW and Charlotte and Chicago,” Isom said, and cuts aren’t expected at hubs in Phoenix, Philadelphia or Miami.


https://www.usatoday.com/story/travel/flights/todayinthesky/2018/07/26/aa-adds-43-nonstop-routes-before-trimming-growth-higher-fuel-costs/841243002/
 
Lennundus
Posts: 26
Joined: Wed Oct 18, 2017 2:30 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 8:31 pm

tphuang wrote:
MIflyer12 wrote:
ScottB wrote:


They should if it doesn't make money -- or if they'd make more money with the aircraft at DFW/CLT/LAX. PHX is problematic because it offers few unique benefits to the network and AA is unlikely to ever achieve dominance in the market. WN is the market leader in most head-to-head non-stop markets from PHX and AA rarely achieves an appreciable revenue premium (if not a deficit) over WN outside of hub-to-hub markets. G4 is in enough smaller markets from AZA that AA can't use high fares on regional jets to small markets to prop up the hub.


Come on, you're arguing a hypothetical. Has AA ever said that PHX loses money? Have they argued it's their least-profitable hub? Some markets are big enough that you need to be in them in a significant fashion. Relocating to LAX is a canard - there isn't, and won't be, sufficient capacity to expand at LAX. PHX is AA's best option in the west. Are you going to argue that AA should give up in LGA because they can't match Delta's scale?


AA's pre-tax margin here is 5.6%. CLT and DFW are clearly far and away their most profitable hubs. PHL and MIA are likely more profitable than PHX given AA's dominance there. They have over 50% market share at DCA. Their probably below average in profit at ORD. At this point, PHX looks like at best their 6th most profitable hubs and probably well below average in margin considering how CLT/DFW outweighs in profitability compared to other stations.

They are clearly not retreating at ORD given their statements. They are not retreating at LAX with all the investment they put in. They won't give away slots to other people at DCA and LGA. So they are going to cut from remaining hubs. What does that leave us? JFK most likely and other than that PHX. PHL and MIA just got new flights, so those are not likely to get drawn down.

AA has said internally that PHX is their 3rd or 4th most profitable hub.
 
ScottB
Posts: 6641
Joined: Fri Jul 28, 2000 1:25 am

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 8:42 pm

OA412 wrote:
Indeed, per numbers published by PHX, AA is larger in number of passengers carried at PHX than WN. In 2017, AA (including regional carriers) carried 20.3 million passengers compares to WNs 14.8 million. I can't speak to the revenue numbers, but in terms of overall passenger numbers, AA is larger than WN at PHX.


AA carries more passengers at PHX, but WN carries more O&D passengers in most markets where they compete head-to-head. Of the 16 largest PHX O&D markets in Q3 2017 (over 500 PDEW), WN had leading market share in 7, followed by AA with 5, DL with 3, and AS with 1. Of the five where AA led in market share, four were AA hub markets (DFW/DAL, ORD/MDW, WAS, NYC, and BOS) and WN only effectively competes in the first three. It's even more lopsided for WN in markets over 250 PDEW where they lead in 15 of 27. For markets over 100 PDEW, WN leads in 25 of 44.

AA just connects a heck of a lot more people at PHX than WN.

TWFlyGuy wrote:
Another advantage PHX has is relatively low cost much like CLT. The below link is 2015 data but likely hasn't changed drastically and you can see PHX is at $6.13 vs. DFW @ $11.28.


The cost advantage PHX enjoys over DFW is a bit misleading, though, in that the more meaningful number would be marginal cost per enplanement at DFW. AA is by far the largest carrier at DFW and is stuck with covering most of the airport's fixed costs; flowing more passengers through DFW would lower average cost per passenger (up until they'd be required to add expensive new capacity to process passengers). AA shares fixed airport costs at PHX with WN so they benefit less directly from choosing to place more flow through PHX.

ericm2031 wrote:
DFW is too far for much of the West Coast if they are flying to somewhere else on the West Coast and would cause a lot of backtracking. LAX can't absorb anything. A lot of cities in the West rely exclusively (or almost exclusively) on PHX as they aren't priority for LAX gates.


But honestly, how many cities on the West Coast with significant traffic are linked to PHX but not LAX? Sure, AA serves most of the regional Southern California airports from PHX, but is it really profitable to compete with WN by flying someone OAK-PHX-SNA? The only largish markets west of Texas and not regional alternates in California which aren't served by AA from LAX are BOI and GEG.
 
TWFlyGuy
Posts: 399
Joined: Mon Apr 17, 2017 5:10 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 8:58 pm

ScottB wrote:
OA412 wrote:
Indeed, per numbers published by PHX, AA is larger in number of passengers carried at PHX than WN. In 2017, AA (including regional carriers) carried 20.3 million passengers compares to WNs 14.8 million. I can't speak to the revenue numbers, but in terms of overall passenger numbers, AA is larger than WN at PHX.


AA carries more passengers at PHX, but WN carries more O&D passengers in most markets where they compete head-to-head. Of the 16 largest PHX O&D markets in Q3 2017 (over 500 PDEW), WN had leading market share in 7, followed by AA with 5, DL with 3, and AS with 1. Of the five where AA led in market share, four were AA hub markets (DFW/DAL, ORD/MDW, WAS, NYC, and BOS) and WN only effectively competes in the first three. It's even more lopsided for WN in markets over 250 PDEW where they lead in 15 of 27. For markets over 100 PDEW, WN leads in 25 of 44.

AA just connects a heck of a lot more people at PHX than WN.

TWFlyGuy wrote:
Another advantage PHX has is relatively low cost much like CLT. The below link is 2015 data but likely hasn't changed drastically and you can see PHX is at $6.13 vs. DFW @ $11.28.


The cost advantage PHX enjoys over DFW is a bit misleading, though, in that the more meaningful number would be marginal cost per enplanement at DFW. AA is by far the largest carrier at DFW and is stuck with covering most of the airport's fixed costs; flowing more passengers through DFW would lower average cost per passenger (up until they'd be required to add expensive new capacity to process passengers). AA shares fixed airport costs at PHX with WN so they benefit less directly from choosing to place more flow through PHX.

ericm2031 wrote:
DFW is too far for much of the West Coast if they are flying to somewhere else on the West Coast and would cause a lot of backtracking. LAX can't absorb anything. A lot of cities in the West rely exclusively (or almost exclusively) on PHX as they aren't priority for LAX gates.


But honestly, how many cities on the West Coast with significant traffic are linked to PHX but not LAX? Sure, AA serves most of the regional Southern California airports from PHX, but is it really profitable to compete with WN by flying someone OAK-PHX-SNA? The only largish markets west of Texas and not regional alternates in California which aren't served by AA from LAX are BOI and GEG.



The argument that they don't share costs in DFW but do in PHX doesn't make sense. If that were the case then costs in CLT would be far higher as well yet they're only $1 and change. Airports are generally not profit centers. They re-invest profits into facilities. The costs are the costs to run, build maintain the airport. That generally gets spread evenly across the carriers. If you carry more pax than me, you're total cost is higher but out CPE is equal.
 
727200
Posts: 633
Joined: Fri Mar 17, 2017 5:31 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 9:45 pm

I listened to the earnings call and after it was done my impression, this is Smisek Round 2. All the officers of AA repeated the same song and dance and it was a very generic response to what are they going to do to right this ship? And the trump card for Parker was repeatedly, "This is a $5B earnings company...believe me." Plus the cuts they are talking about wont produce results until mid 2019 they admitted.

I got the impression Doug and group sat by the speaker phone 'praying' the analyst's fell for this 'song and dance.' The reality is as they were told, "UAL couldn't do anything right, now they have moved up to #2 position and AA has fallen to #3." And when pressed, they had no plan to climb back up.

Hey, Jeff is available in the bull pen warming up if needed Dougie; he might be a better leader than the one they have now.
 
alasizon
Posts: 1936
Joined: Sat Apr 28, 2007 8:57 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 9:53 pm

727200 wrote:
I listened to the earnings call and after it was done my impression, this is Smisek Round 2. All the officers of AA repeated the same song and dance and it was a very generic response to what are they going to do to right this ship? And the trump card for Parker was repeatedly, "This is a $5B earnings company...believe me." Plus the cuts they are talking about wont produce results until mid 2019 they admitted.

I got the impression Doug and group sat by the speaker phone 'praying' the analyst's fell for this 'song and dance.' The reality is as they were told, "UAL couldn't do anything right, now they have moved up to #2 position and AA has fallen to #3." And when pressed, they had no plan to climb back up.

Hey, Jeff is available in the bull pen warming up if needed Dougie; he might be a better leader than the one they have now.


Isom has the proper responses when it comes to the operational metrics in my opinion but you certainly get the opinion that Isom doesn't have the power he needs to when compared with Doug. For the plan to be domestic growth less than GDP growth is just odd in my opinion given the domestic market is where AA could prevent UA from leapfrogging them since UA has the weakest domestic network currently.
Manager on Duty & Tower Planner
 
soflaflyer
Posts: 172
Joined: Sat Feb 16, 2008 10:35 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 10:08 pm

PRAirbus wrote:
Great to see the 767 fleet dwindling! Good riddance, they need to go away soon! (6) leaving this year and last (5) in 2020; 18 active in 2019.


Unfortunately 6 don't leave until sometime in 2019, I assume after the summer. 24 active through the end of 2018....I know, scary thought that pax might have to endure yet one more summer on the unreliable 767s
 
tphuang
Posts: 3223
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 10:42 pm

alasizon wrote:
727200 wrote:
I listened to the earnings call and after it was done my impression, this is Smisek Round 2. All the officers of AA repeated the same song and dance and it was a very generic response to what are they going to do to right this ship? And the trump card for Parker was repeatedly, "This is a $5B earnings company...believe me." Plus the cuts they are talking about wont produce results until mid 2019 they admitted.

I got the impression Doug and group sat by the speaker phone 'praying' the analyst's fell for this 'song and dance.' The reality is as they were told, "UAL couldn't do anything right, now they have moved up to #2 position and AA has fallen to #3." And when pressed, they had no plan to climb back up.

Hey, Jeff is available in the bull pen warming up if needed Dougie; he might be a better leader than the one they have now.


Isom has the proper responses when it comes to the operational metrics in my opinion but you certainly get the opinion that Isom doesn't have the power he needs to when compared with Doug. For the plan to be domestic growth less than GDP growth is just odd in my opinion given the domestic market is where AA could prevent UA from leapfrogging them since UA has the weakest domestic network currently.


They are talking about international growth because that’s doing better than domestic. Why would they add into markets that is seeing weaker performance?
 
winginit
Posts: 2555
Joined: Sat Feb 23, 2013 9:23 pm

Re: AA Q2 2018 earnings

Thu Jul 26, 2018 11:30 pm

alasizon wrote:
Isom has the proper responses when it comes to the operational metrics in my opinion but you certainly get the opinion that Isom doesn't have the power he needs to when compared with Doug.


I was thinking this same thing while listening to the call, and it seems to me at least that the one-two dynamic at AA hasn't really righted itself since Scott's departure. Doug and Scott did this really well early on in the post-merger world with Doug speaking to the high level strategy and Kirby coming through with an aggressive stance around the specifics and the logic behind them, and they'd team up when particularly pressed on a call while rarely having to clarify for the other or jump in over one another.

That's essentially the same good cop bad cop dynamic with analysts that Ed and Glen have used effectively since Richard left, and you've seen it replicated with Oscar and Scott as well in recent months. To me Parker and Isom are less of a unit, with Doug having to get down into the weeds more than he did and more than he likes to while Isom is sort of sitting there asking for permission almost out of his element.

It doesn't necessarily matter, but it makes me question whether Isom has yet really grown into his new role and what impacts that might be having behind the scenes.
 
cm642
Posts: 97
Joined: Fri Oct 02, 2015 8:16 pm

Re: AA Q2 2018 earnings

Fri Jul 27, 2018 12:02 am

Here we go with the PHX scenario again. AA would be stupid to give up PHX, that would leave room for other carriers like SW, F9, and B6 as well as DL and UA to move in and believe me they would. If AA dehubbed PHX it would be a godsend for these other carriers, especially since DL & UA are being super aggressive with their expansions!
 
tphuang
Posts: 3223
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA Q2 2018 earnings

Fri Jul 27, 2018 1:43 am

cm642 wrote:
Here we go with the PHX scenario again. AA would be stupid to give up PHX, that would leave room for other carriers like SW, F9, and B6 as well as DL and UA to move in and believe me they would. If AA dehubbed PHX it would be a godsend for these other carriers, especially since DL & UA are being super aggressive with their expansions!

huge difference between dehubbing and making some cuts. PHL had some cuts after merger and now it's growing again.
 
cm642
Posts: 97
Joined: Fri Oct 02, 2015 8:16 pm

Re: AA Q2 2018 earnings

Fri Jul 27, 2018 1:56 am

tphuang wrote:
cm642 wrote:
Here we go with the PHX scenario again. AA would be stupid to give up PHX, that would leave room for other carriers like SW, F9, and B6 as well as DL and UA to move in and believe me they would. If AA dehubbed PHX it would be a godsend for these other carriers, especially since DL & UA are being super aggressive with their expansions!

huge difference between dehubbing and making some cuts. PHL had some cuts after merger and now it's growing again.


Which is what was expected, it's had some cuts and was right sized but is also beginning to grow again but everyone keeps bringing up the doom and gloom scenario of it being completely dehubbed every time there's a thread involving AA.
 
usairways787
Posts: 224
Joined: Wed Jun 22, 2005 12:42 pm

Re: AA Q2 2018 earnings

Fri Jul 27, 2018 2:29 am

chrisp390 wrote:
Would it be possible for AA to lift their operation in PHX and move it to DFW? It seems like it would make DFW a stronger hub by doing so.


We're pretty maxed out and short handed as it is. Please no.

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos