Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
American Airlines Group Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,815 – 8.90% × 30,476 = 102
The financial performance from 2019 to 2023 is characterized by a severe contraction followed by a phased recovery in value creation. The company transitioned from a state of positive economic profit to significant value destruction during the 2020-2022 period, ultimately returning to a positive economic profit position by the end of 2023.
- Net Operating Profit After Taxes (NOPAT)
- A period of extreme volatility is observed, with NOPAT collapsing from 3,350 million US$ in 2019 to a deficit of 10,143 million US$ in 2020. A consistent upward trajectory followed, moving from -736 million US$ in 2021 to 2,040 million US$ in 2022, and reaching 2,815 million US$ in 2023. This recovery indicates a restoration of core operational profitability.
- Invested Capital and Cost of Capital
- Invested capital experienced a downward trend from 35,495 million US$ in 2019 to a low of 29,074 million US$ in 2021, before stabilizing near 30,476 million US$ by 2023. The cost of capital remained relatively stable throughout the period, fluctuating within a narrow band between 7.93% and 8.90%, suggesting a consistent risk profile and funding cost environment despite operational turbulence.
- Economic Profit Trends
- Economic profit reflects the volatility of NOPAT relative to the capital charge. After a positive start in 2019 at 246 million US$, economic profit fell sharply to -12,800 million US$ in 2020. The subsequent recovery was gradual, with losses narrowing to -3,042 million US$ in 2021 and -687 million US$ in 2022. The return to a positive value of 102 million US$ in 2023 signifies that the company is once again generating returns in excess of its cost of capital.
The overall trajectory indicates that while the company suffered a massive erosion of economic value between 2020 and 2022, the combination of increasing NOPAT and a stabilized capital base has enabled a return to value creation. The shift from a deficit of 687 million US$ to a surplus of 102 million US$ in the final year confirms a successful pivot back to positive economic profit.
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Net Operating Profit after Taxes (NOPAT)
American Airlines Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to net income (loss).
3 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 7,761 × 7.60% = 590
4 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 2,735 × 21.00% = 574
5 Addition of after taxes interest expense to net income (loss).
6 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 591 × 21.00% = 124
7 Elimination of after taxes investment income.
- Net Income (Loss)
- The net income experienced a substantial decline from a profit of 1,686 million USD in 2019 to a significant loss of 8,885 million USD in 2020. This negative trend continued with a loss of 1,993 million USD in 2021. However, the company showed a recovery trend starting in 2022, reporting a slight profit of 127 million USD, which further increased to 822 million USD in 2023. This indicates a recovery phase following the sharp downturn experienced in 2020 and 2021.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT followed a pattern similar to net income. It declined from 3,350 million USD in 2019 to a substantial loss of 10,143 million USD in 2020. Although the loss narrowed in 2021 to 736 million USD, the company returned to profitability in 2022 with 2,040 million USD and further increased profitability to 2,815 million USD in 2023. This improvement suggests enhanced operating efficiency and effective cost management efforts post-2021.
- Overall Trends and Insights
- Both profitability metrics highlight a severe impact on financial performance during 2020 and 2021, likely indicative of broad industry or economic challenges during that period. The subsequent years show a gradual but steady recovery in operational and net profitability. The profit levels in 2023, while improved compared to the losses in 2020 and 2021, have not yet returned to the high levels seen in 2019. This recovery trajectory suggests resilience and a positive outlook but indicates that full pre-crisis profitability has not been fully restored as of 2023.
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Cash Operating Taxes
American Airlines Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
- Income Tax Provision (Benefit)
-
The income tax provision exhibited significant volatility over the five-year period. In 2019, it was a positive figure of $570 million, indicating tax expense for that year. However, in 2020, there was a notable shift to a substantial tax benefit of -$2,568 million, reflecting either tax credits, losses, or adjustments that reduced tax liabilities significantly. In 2021, the income tax provision remained negative at -$555 million, though the magnitude of the tax benefit decreased compared to 2020.
Beginning in 2022, the figure reverted to a positive income tax provision, indicating tax expense of $59 million, and then increased to $299 million in 2023. This trend suggests a recovery or return to profitability whereby the company is liable for taxes again after consecutive benefit years.
- Cash Operating Taxes
-
Cash operating taxes increased steadily from $303 million in 2019 to $348 million in 2020, followed by further increases to $482 million in 2021 and peaking at $485 million in 2022. There was a slight decline to $450 million in 2023.
This pattern indicates that despite variations in reported income tax provision, cash taxes paid have generally risen over the period, suggesting ongoing tax obligations tied to operational profits or other taxable activities independent from accounting income tax expense or benefits. The slight decline in the final year could imply adjustments in taxable income, changes in tax planning, or other operational modifications affecting cash tax outflows.
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Invested Capital
American Airlines Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to stockholders’ deficit.
4 Removal of accumulated other comprehensive income.
5 Subtraction of short-term investments.
The financial data reveals several important trends regarding debt, equity position, and invested capital over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases show an overall increasing trend from 2019 through 2021, rising from $33.4 billion to $46.2 billion. This suggests significant additional borrowing or lease obligations during this time. However, in the subsequent years 2022 and 2023, the debt level decreased to $43.7 billion and then to $40.7 billion, respectively. This indicates a deleveraging phase following the peak in 2021, possibly reflecting efforts to reduce leverage or repayments of obligations.
- Stockholders’ Deficit
- The stockholders’ deficit worsened dramatically from a minor negative $118 million in 2019 to substantial deficits of approximately $6.9 billion and $7.3 billion in 2020 and 2021, respectively. After peaking in 2021, the deficit began a gradual improvement, declining to about $5.8 billion in 2022 and further to $5.2 billion in 2023. This trend indicates that while the company faced heavy equity erosion likely due to losses or impairments during 2020-2021, it started to stabilize or recover its equity base in the following years.
- Invested Capital
- Invested capital decreased steadily from $35.5 billion in 2019 to $29.1 billion in 2021, reflecting contraction or write-downs in invested assets or net working capital components. From 2021 onwards, invested capital showed a modest recovery, increasing to $30.9 billion in 2022 before slightly declining to $30.5 billion in 2023. This pattern suggests some stabilization or reinvestment activities after the initial decline.
Overall, the data signals a company that expanded its debt significantly in the early years of the period analyzed, likely under challenging conditions around 2020 and 2021, as reflected by the sharply increased deficit and reduced invested capital. The trend reverses partially after 2021, with reductions in debt and improvements in equity deficit indicating a phase of financial repair and stabilization. The relatively stable invested capital in later years suggests cautious reinvestment or asset base recovery.
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Cost of Capital
American Airlines Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 9,684) | 9,684) | ÷ | 50,261) | = | 0.19 | 0.19 | × | 24.06% | = | 4.64% | ||
| Long-term debt and finance lease liabilities, including current maturities3 | 32,816) | 32,816) | ÷ | 50,261) | = | 0.65 | 0.65 | × | 6.47% × (1 – 21.00%) | = | 3.34% | ||
| Operating lease liability4 | 7,761) | 7,761) | ÷ | 50,261) | = | 0.15 | 0.15 | × | 7.60% × (1 – 21.00%) | = | 0.93% | ||
| Total: | 50,261) | 1.00 | 8.90% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,136) | 10,136) | ÷ | 51,490) | = | 0.20 | 0.20 | × | 24.06% | = | 4.74% | ||
| Long-term debt and finance lease liabilities, including current maturities3 | 33,330) | 33,330) | ÷ | 51,490) | = | 0.65 | 0.65 | × | 6.24% × (1 – 21.00%) | = | 3.19% | ||
| Operating lease liability4 | 8,024) | 8,024) | ÷ | 51,490) | = | 0.16 | 0.16 | × | 7.40% × (1 – 21.00%) | = | 0.91% | ||
| Total: | 51,490) | 1.00 | 8.84% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 11,315) | 11,315) | ÷ | 58,736) | = | 0.19 | 0.19 | × | 24.06% | = | 4.64% | ||
| Long-term debt and finance lease liabilities, including current maturities3 | 39,304) | 39,304) | ÷ | 58,736) | = | 0.67 | 0.67 | × | 4.93% × (1 – 21.00%) | = | 2.61% | ||
| Operating lease liability4 | 8,117) | 8,117) | ÷ | 58,736) | = | 0.14 | 0.14 | × | 6.30% × (1 – 21.00%) | = | 0.69% | ||
| Total: | 58,736) | 1.00 | 7.93% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 11,508) | 11,508) | ÷ | 50,962) | = | 0.23 | 0.23 | × | 24.06% | = | 5.43% | ||
| Long-term debt and finance lease liabilities, including current maturities3 | 31,026) | 31,026) | ÷ | 50,962) | = | 0.61 | 0.61 | × | 4.77% × (1 – 21.00%) | = | 2.29% | ||
| Operating lease liability4 | 8,428) | 8,428) | ÷ | 50,962) | = | 0.17 | 0.17 | × | 5.60% × (1 – 21.00%) | = | 0.73% | ||
| Total: | 50,962) | 1.00 | 8.46% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities, including current maturities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 12,070) | 12,070) | ÷ | 46,377) | = | 0.26 | 0.26 | × | 24.06% | = | 6.26% | ||
| Long-term debt and finance lease liabilities, including current maturities3 | 25,178) | 25,178) | ÷ | 46,377) | = | 0.54 | 0.54 | × | 4.08% × (1 – 21.00%) | = | 1.75% | ||
| Operating lease liability4 | 9,129) | 9,129) | ÷ | 46,377) | = | 0.20 | 0.20 | × | 4.70% × (1 – 21.00%) | = | 0.73% | ||
| Total: | 46,377) | 1.00 | 8.74% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt and finance lease liabilities, including current maturities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
American Airlines Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 102) | (687) | (3,042) | (12,800) | 246) | |
| Invested capital2 | 30,476) | 30,859) | 29,074) | 31,408) | 35,495) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.34% | -2.23% | -10.46% | -40.75% | 0.69% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | -6.62% | -6.25% | -3.71% | — | — | |
| Uber Technologies Inc. | -3.75% | -73.74% | -22.90% | — | — | |
| Union Pacific Corp. | -3.41% | -1.50% | -2.36% | — | — | |
| United Airlines Holdings Inc. | 0.85% | -3.37% | -10.29% | — | — | |
| United Parcel Service Inc. | 0.68% | 11.65% | 17.48% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 102 ÷ 30,476 = 0.34%
4 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 is characterized by a severe contraction in economic value followed by a progressive recovery. After maintaining a positive economic position in 2019, the period was marked by significant value destruction peaking in 2020, before returning to positive territory by the end of 2023.
- Economic Profit Trends
- Economic profit experienced a precipitous decline from 246 million US$ in 2019 to a deficit of 12,800 million US$ in 2020. A steady recovery trend followed, with losses narrowing to 3,042 million US$ in 2021 and 687 million US$ in 2022. By 2023, the metric returned to a positive value of 102 million US$, signaling a return to generating wealth above the cost of capital.
- Invested Capital Stability
- Invested capital exhibited greater stability than profit metrics, though a downward trend was observed from 35,495 million US$ in 2019 to a low of 29,074 million US$ in 2021. This was followed by a slight increase to 30,859 million US$ in 2022 and relative stabilization at 30,476 million US$ in 2023.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrors the volatility of economic profit, dropping from 0.69% in 2019 to a critical low of -40.75% in 2020. The subsequent recovery is evident in the progression to -10.46% in 2021 and -2.23% in 2022. The ratio concluded the period at 0.34% in 2023, indicating that the return on invested capital has once again exceeded the cost of capital, although the margin remains lower than the pre-crisis level observed in 2019.
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Economic Profit Margin
American Airlines Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 102) | (687) | (3,042) | (12,800) | 246) | |
| Operating revenues | 52,788) | 48,971) | 29,882) | 17,337) | 45,768) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.19% | -1.40% | -10.18% | -73.83% | 0.54% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | -5.10% | -4.44% | -2.84% | — | — | |
| Uber Technologies Inc. | -1.58% | -37.80% | -21.09% | — | — | |
| Union Pacific Corp. | -8.70% | -3.59% | -6.31% | — | — | |
| United Airlines Holdings Inc. | 0.71% | -3.07% | -21.67% | — | — | |
| United Parcel Service Inc. | 0.34% | 5.20% | 7.98% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × 102 ÷ 52,788 = 0.19%
3 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a severe contraction followed by a phased recovery. A significant volatility event in 2020 led to a collapse in both revenue and value creation, though a steady upward trajectory returned in subsequent years, culminating in a return to positive economic profit by the end of 2023.
- Operating Revenue Trends
- Operating revenues experienced a precipitous decline in 2020, falling from 45,768 million US$ to 17,337 million US$. This was followed by a consistent recovery, with revenues exceeding pre-2020 levels by 2022 and reaching a peak of 52,788 million US$ in 2023.
- Economic Profit Trajectory
- Economic profit shifted from a positive 246 million US$ in 2019 to a substantial deficit of 12,800 million US$ in 2020. The subsequent years show a narrowing of these losses, moving to -3,042 million US$ in 2021 and -687 million US$ in 2022, before returning to a positive value of 102 million US$ in 2023.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of absolute profit, dropping from 0.54% in 2019 to -73.83% in 2020. The recovery of this margin was incremental, improving to -10.18% in 2021 and -1.40% in 2022. By 2023, the margin reached 0.19%, indicating that the company has resumed generating value above its cost of capital, although the margin remains lower than the 2019 baseline.
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