Since APC is a relative ghost town for AA pilots (as opposed to the various FB groups, the union forum, etc), I’ll copy/pasta the following. There’s a fairly well-respected AA captain, formerly on the financial analysis committee at APA, that posts his thoughts every now and then. FWIW:

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Initial analysis on 2Q report for American:
Facts:
* American earned 76 cents per share, in line with analysts consensus. Omitting special items, American earned 533 million for 2Q. The company projects a profitable third quarter with a -2/+4% vs 2019 margin.
* American operated, depending on which metric is utilized, 9% less capacity than 2Q 2019 yet earned +12.5% revenue, indicating a massive increase in RASM over historical levels.
* Domestic revenue in every category recovered abd exceeded pre pandemic levels from 2q 2019. Total business domestic travel was at 110% of 2Q 2019, leisure at 121%, total domestic at 116%. Short-haul international plus domestic was at 120%.
* Liquidity remains strong at 15.6B total liquidity, stable now for 3 quarters.
* Debt -schedule to decrease total debt (this includes pension, lease obligations, and true debt) by 15B by 2025 is on track. Total debt is down 5.2B from the 2q 2021 peak. No major maturities are scheduled until 2023 (1.2 B) and none in 2024. Refleeting has reduced the level of anticipated capex in 2022-2023.
* To reduce operational problems, American will reduce capacity 8-10% in 3Q vs 3Q 2019, yet projects +10/+12 revenue for the quarter over 3Q 2019.
Analysis
American has returned to pre-pandemic patterns of profitability while trailing industry leaders. This is due to a number of factors including the deleveraging program and operational inefficiency. This is consistent with my modeling @3q 2021. I expect this pattern to continue.
The revenue environment indicates stunning levels of demand and pricing power, with large capacity cuts versus 2019 yielding double digits more revenue.
The capacity shortage is to a certain extent protective, rendering the industry relatively immune from a recession. As an example- significant recessions based on historical examples could suppress global demand 3-5%. This would still leave industry capacity based on airframes well short of demand.
The company has likely underestimated the reduction in fuel costs in 3Q and forward. In 2Q fuel costs eclipsed wages, a measure of the high fuel prices. Based on predicted fuel price trends from analyst consensus I anticipate that this ratio will flip at some point in 3Q and steady state, will reduce overall CASM significantly (labor agreements or other factors could change this formula.)
The company continues to deleverage on schedule and enjoys industry low debt and finance rates. The need for other competitors to refleet, at higher acquisition cost and interest, will bring competitor debt in-line with the company by 2025 if not before. I reiterate my consistently stated position that debt is not a threat to the company in the near to medium term (1-5 years). 15.6 B is a black swan liquidity total, well above typical liquidity needs absent black swan events. Expect to see 5-7B in present liquidity used to prepay debt and further reduce leverage.
There is significant room to run on the revenue side. Medium to long haul International and international business travel revenue still trails 2019 levels. The industry carried 10-15% of ASM to Asia/Pacific pre-pandemic and revenue in this sector still has substantially not recovered.
The company has predicted profitability for the 3Q and I anticipate based on my modeling that the margin will fall in the 3% range. I am cautiously optimistic that the fourth quarter will be slightly higher (3-5%) and that the company will be profitable for the year.
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