No-moat-rated American Airlines AAL posted significant top-line growth in the first quarter as the effects of the omicron variant faded, allowing for considerably more travel activity. Revenue of $8.9 billion and a loss per share of $2.32 beat FactSet consensus by 1.3% and 3.1%, respectively. We are reducing our fair value estimate to $19 per share from $19.50 as we incorporate the effects of significantly higher near-term fuel prices into our model.
Passenger revenue was 84% of 2019 levels as capacity sequentially decreased by 2.6% to 89.3% of 2019 levels, load factors compressed 580 basis points to 74.4%, and yields sequentially increased by 3.1%. We view these as strong results, considering that the omicron variant surge depressed travel significantly during January and February. Business travel has recovered to about 80% of 2019 levels, with small and medium-size business-related revenue nearly fully recovered. Notably, management indicated that business travel is changing to involve longer stays in locations as business travelers blend leisure travel into their trips. This fits into our thesis that travel will adapt to new preferences, though we still think there will be a 10%-20% loss in total business travel.
Unit costs excluding fuel and special items sequentially increased 1.8% as capacity shrank 2.6%, which we view as evidence of the firm continuing to control costs as the operating environment improves. Fuel costs sequentially increased 18.6%, and management expects fuel costs to continue rising in the second quarter. While fuel cost changes do not affect our midcycle fuel cost estimates, we view the increased fuel prices as an additional hurdle the airlines will need to overcome on the pathway to profitability.
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