It was a good news/bad news fourth quarter for cargo at American Airlines. At face value, cargo revenue fell at a greater clip than the rest of 2022, but yields remained well above the pre-pandemic baseline and the company still generated the second-best annual cargo sales in its history.
The Fort Worth, Texas, carrier reported $263 million in cargo revenue for the final three months of the year, a 23% drop from the 2021 market high as the yearlong slowdown in business accelerated. The results were 22% better than in 2019, a benchmark for stable business before the COVID crisis upset the global economy, and the same as in 2018 — a robust year for the air cargo industry and American Airlines’ (NASDAQ: AAL) best quarter prior to 2021.
For the full year, American recorded $1.23 million in cargo revenue, down 6.2% — $80 million — from 2021, but 42.5% above 2019 and nearly 22% above the previous high-water mark in 2018.
CFO Devon May said on the earnings briefing that management expects cargo revenue to decline slightly in 2023.
All airlines experienced reduced cargo earnings in 2022 as high inflation and global economic uncertainty crimped consumer spending, retailers with high inventories cut back overseas orders and cargo flowed back to ocean transport with reduced congestion and cheaper rates. The fourth quarter typically is the strongest shipping period ahead of the holidays, but bookings stayed tepid.
Among the big three U.S. international carriers, United Airlines (NASDAQ: UAL) took the cargo prize once again with $472 million in fourth-quarter revenue and $2.17 billion in revenue for the year. But it also lost more ground than American, with quarterly and full-year declines of 35% and 7.6%, respectively, versus 2021.
Delta Air Lines (NYSE: DAL) also squeaked past the $1 billion mark after cargo revenue slid more than 18% to $248 million in the quarter.
American said cargo ton miles, which measures the impact of distance hauled on revenue, slipped about 5.5% during the fourth quarter and full year. Quarterly yield dropped 18.3%, a function of reduced demand and more cargo capacity entering the market as passenger carriers reintroduced more flights after COVID. But at 57.4 cents per ton mile, the average rate was 21 cents better than in 2018 and 2019 — another data point that suggests that falling rates won’t return to pre-pandemic levels because of high fuel, labor and other costs.
On the passenger side, the fourth quarter told a positive story as travel demand remained robust. American Airlines posted net income of $803 million, making up for losses earlier in the year on record revenue of $13.2 billion despite flying 6% less capacity than in 2019. Cargo represented 2% of total revenue, returning to the normal pattern after increasing to 4% the past two years.
American had an operating margin of 10.5% and finished the year with $12 billion in liquid assets after prepaying a $1.2 billion loan.
Management said the first three weeks of the year had the strongest bookings in a decade, indicating strong travel demand for the year.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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