What to look for when American Airlines reports Q2 earnings

American Airlines Group (NASDAQ: AAL) is scheduled to report its earnings results for the second quarter of 2019 on Thursday before the market opens. The results will be benefited by softening fuel prices and fleet simplification while the 737 Max suspension could slow the growth as capacity constraints increase. The cancellations of the Max has been extended through November 2 by the air carrier.

Even a small change in fuel price, which represents one of the largest single cost items, could have a material effect on its results and liquidity. Based on 2019 forecasted mainline and regional fuel consumption, the company estimates that a one cent per gallon increase in aviation fuel price would increase its 2019 annual fuel expense by $45 million.

The company’s business plan contemplates continued significant investments related to modernizing its fleet, improving the experience of customers and updating its facilities. The company estimates that its planned aggregate expenditures for aircraft purchase commitments and certain engines for calendar 2019-2023 would be about $8.4 billion.

As of the end of the first quarter, total debt stood at $33.44 billion while the company had a total cash of 4.35 billion. In the past, American Airlines has from time to time refinanced, redeemed or repurchased its debt and taken other steps to lower debt and improve its balance sheet. The company will continue to take such actions depending on market conditions, its cash position, and other considerations.

Analysts expect the company’s earnings to increase by 9.80% to $1.79 per share and revenue will rise by 2.70% to $11.96 billion for the second quarter. In comparison, during the previous year quarter, American Airlines posted a profit of $1.63 per share on revenue of $11.64 billion. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.

Also read: Will Boeing 737 Max take off again this year

For the first quarter, the company reported a 16% growth in earnings helped by lower costs and expenses. Revenue rose by 1.8% year-over-year backed by strong passenger demand. The grounding of 737 Max aircraft has impacted the first quarter pre-tax income by about $80 million with the total impact is estimated to be about $350 million for 2019.

The grounding has forced American Airlines to cancel as many as 1,200 flights during the first quarter. The company’s fleet includes 24 Boeing 737 Max aircraft with an additional 76 aircraft on order.

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