American Airlines since spring 2022 has signaled to travel management companies a lessening emphasis on contracted corporate travel, one travel management company CEO told BTN, citing reduced incentives and smaller corporate discounts. “They are essentially saying, ‘We don’t want to have a business travel focus,’ ” that CEO said.
That stance seems to have gained evidence after a Thursday earnings call in which chief commercial officer Vasu Raja pointed to the carrier’s declining reliance on contracted corporate travel. About 30 percent of American’s revenue comes from leisure, Raja said, with 45 percent from blended trips with both business and leisure components, and about 25 percent are what the carrier calls traditional business trips. That 25 percent number is down 10 points from the 35 percent it has been historically, he said.
“Within the 25 percent, only about five to seven points of that are coming from contracted corporations,” Raja said. “The rest are noncontracted, unmanaged businesses who are flying on us.”
In terms of revenue, the company’s noncontracted business travel has recovered 100 percent to 2019 levels, he said, while contracted revenue is about 75 to 80 percent recovered, he said, and American doesn’t necessarily expect it to grow. “We also aren’t building a plan based on a lot of that demand returning,” he said.
Further, nearly two-thirds to 75 percent of corporate contracts are not fulfilling the terms of their contracts “for understandable reasons,” Raja added, noting some companies still are having trouble bringing people back to the office and that a business day trip is now a harder sell. “Same-day corporate business trips—which used to be 3 percent to 4 percent of our traffic—is less than 1 percent of our traffic,” he said. “That’s been out there for a while, and we are planning that that’s going to be the new norm.”
Q4, Full-Year 2022 Metrics
American reported fourth-quarter 2022 revenue of $13.19 billion, of which $12.13 billion was passenger revenue, representing year-over-year increases of 39.9 percent and 44.7 percent, respectively. The quarterly revenue was a 16.6 percent increase over Q4 2019 despite 6.1 percent less capacity and was the highest fourth-quarter revenue in company history, according to the carrier. Full-year 2022 revenue was $48.97 billion, with $44.57 billion in passenger revenue, up 63.9 percent and 71 percent year over year, respectively.
Quarterly net income was $803 million; full-year net income was $127 million. “We’re pleased to report a full-year profit for the first time since 2019 despite our fuel price increasing by approximately 70 percent,” American CEO Robert Isom said.
First-quarter capacity guidance is for an increase of between 8 percent and 10 percent year over year, and between 5 percent and 8 percent for full-year 2023. That represents capacity that is 95 percent to 100 percent of 2019 levels, according to American CFO Devon May.
The average fuel price was $3.50 per gallon for the quarter and $3.54 for the year. Fuel guidance is between $3.33 and $3.38 per gallon for the first quarter of 2023, and between $3 and $3.10 per gallon for the full year.
American took delivery of five Boeing 788s during the fourth quarter and expects to receive the remaining four on order in the first half of 2023, according to Isom. It expects its Boeing 789s to be delivered starting in 2024. Also during the quarter, the carrier took delivery of seven Airbus A321neos, three Embraer E175s and took five Boeing 737-800s out from long-term storage.
