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.
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American Airlines Group Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Common-Size Income Statement
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Net Profit Margin since 2013
- Return on Equity (ROE) since 2013
- Return on Assets (ROA) since 2013
- Debt to Equity since 2013
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Economic Profit
American Airlines Group Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT shows a significant decline from 2019 to 2020, dropping sharply from a positive 3,350 million US dollars to a negative 10,143 million US dollars. Although still negative in 2021 at -736 million US dollars, the figure improved considerably compared to 2020. By 2022, the NOPAT turned positive again at 2,040 million US dollars and continued to increase in 2023, reaching 2,815 million US dollars. This pattern indicates recovery following a period of substantial losses, possibly due to extraordinary circumstances impacting operations during 2020 and 2021.
- Cost of Capital
- The cost of capital remained relatively stable throughout the period. It started at 7.77% in 2019 and dipped slightly to 7.62% in 2020, then further to 7.21% in 2021. From 2022 onwards, it experienced an upward trend, increasing to 8.11% in 2022 and slightly rising again to 8.18% in 2023. This increase in the cost of capital in the latter years suggests a higher rate of return required by investors, which could reflect increased risk or changes in the capital structure or market conditions.
- Invested Capital
- Invested capital decreased from 35,495 million US dollars in 2019 to 31,408 million US dollars in 2020, continuing its decline to 29,074 million in 2021. There was a partial recovery in 2022, rising to 30,859 million US dollars, before a slight decrease again to 30,476 million US dollars in 2023. Overall, invested capital shows a downward trend with some stabilization after 2021, indicating a possible reduction in asset base or a reallocation of resources.
- Economic Profit
- Economic profit mirrors the trend of NOPAT with a high positive value of 590 million US dollars in 2019, followed by a sharp decline to negative 12,536 million US dollars in 2020. The economic loss decreases in magnitude in 2021 to negative 2,833 million US dollars and further improves in 2022 with a much smaller loss of 461 million US dollars. By 2023, economic profit returns to a positive 321 million US dollars. This progression indicates a significant recovery in value creation over the five-year period, transitioning from large economic losses back to positive economic profit.
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
= × =
4 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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.
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 $450 million in 2023.
This pattern indicates that despite variations in reported income tax provision, cash taxes paid have generally risen over the period, suggesting ongoing tax obligations tied to operational profits or other taxable activities independent from accounting income tax expense or benefits. The slight decline in the final year could imply adjustments in taxable income, changes in tax planning, or other operational modifications affecting cash tax outflows.
Invested Capital
American Airlines Group Inc., invested capital calculation (financing approach)
US$ 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 $30.5 billion in 2023. This pattern suggests some stabilization or reinvestment activities after the initial decline.
Overall, the data signals a company that expanded its debt significantly in the early years of the period analyzed, likely under challenging conditions around 2020 and 2021, as reflected by the sharply increased deficit and reduced invested capital. The trend reverses partially after 2021, with reductions in debt and improvements in equity deficit indicating a phase of financial repair and stabilization. The relatively stable invested capital in later years suggests cautious reinvestment or asset base recovery.
Cost of Capital
American Airlines Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liabilities, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liabilities, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liabilities, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liabilities, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Long-term debt and finance lease liabilities, including current maturities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated significant volatility over the analyzed period. It started with a positive figure of 590 million USD at the end of 2019, then sharply declined to a substantial negative value of -12,536 million USD in 2020. This large loss moderated in subsequent years, improving to -2,833 million USD in 2021 and further reduced to -461 million USD in 2022. By the end of 2023, the economic profit returned to a positive territory at 321 million USD, indicating a recovery trend from prior losses.
- Invested Capital
- The invested capital showed a downward trend from 2019 through 2021, decreasing from 35,495 million USD to 29,074 million USD. In 2022, the invested capital slightly increased to 30,859 million USD, followed by a marginal decrease in 2023 to 30,476 million USD. Overall, the invested capital declined about 14% from 2019 to 2023, with some recovery after the 2021 low point.
- Economic Spread Ratio
- The economic spread ratio exhibited substantial fluctuation as well. In 2019, the ratio was positive at 1.66%. It then steeply dropped to -39.91% in 2020, coinciding with the sharp loss in economic profit. Following this, the ratio improved gradually though remaining negative in 2021 (-9.74%) and 2022 (-1.49%). By 2023, the spread ratio returned to a positive figure of 1.05%, aligning with the regained positive economic profit.
- Summary of Trends
- The data reflects a period of significant financial distress around 2020, likely due to external disruptions impacting profitability. The company's economic profit and economic spread ratio both sharply deteriorated in 2020 but showed gradual recovery thereafter, returning to positive values by 2023. Invested capital decreased overall, with a low point in 2021 but some stability in recent years. The convergence of improving economic profit and economic spread ratio suggests enhanced operational performance and efficiency by the end of the period analyzed.
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 | ||||||
| Operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| FedEx Corp. | ||||||
| Uber Technologies Inc. | ||||||
| Union Pacific Corp. | ||||||
| United Airlines Holdings Inc. | ||||||
| United Parcel Service Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
- Operating Revenues
- Operating revenues exhibited significant volatility over the five-year period. There was a notable decrease from 45,768 million US dollars in 2019 to 17,337 million in 2020, reflecting a sharp contraction likely due to external disruptive factors. However, revenues showed a recovery trend from 2020 onward, increasing to 29,882 million in 2021, then to 48,971 million in 2022, and reaching 52,788 million in 2023. This upward trajectory suggests a progressive rebound in business activities and market demand.
- Economic Profit
- The economic profit metric underwent a dramatic shift from a positive 590 million US dollars in 2019 to a substantial negative 12,536 million in 2020, indicating a significant operational or financial downturn during that year. Subsequent years reflected a gradual improvement with economic profit losses decreasing to 2,833 million in 2021 and 461 million in 2022. By 2023, economic profit returned to a positive figure of 321 million, signaling a restoration of profitability and more efficient capital utilization.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations seen in economic profit. Initially positive at 1.29% in 2019, it sharply declined to a negative 72.31% in 2020, in line with the large economic profit loss during the pandemic-affected year. The margin then progressively improved over the next three years, moving to -9.48% in 2021, -0.94% in 2022, and turning positive again at 0.61% in 2023. This progression outlines a recovery in operational efficiency and profitability relative to revenues.
- Overall Trends and Insights
- The data reveals a pronounced impact to financial performance in 2020, followed by sustained recovery across revenues, economic profit, and profit margins through to 2023. The initial sharp declines reflect transient external pressures, while the gradual improvements point to successful adaptation and resilience efforts. Despite the return to positive economic profit and margin in 2023, these remain below 2019 levels, indicating room for further growth and stabilization.