Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
American Airlines Group Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,815) | 2,040) | (736) | (10,143) | 3,350) | |
| Invested capital2 | 30,476) | 30,859) | 29,074) | 31,408) | 35,495) | |
| Performance Ratio | ||||||
| ROIC3 | 9.24% | 6.61% | -2.53% | -32.29% | 9.44% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| FedEx Corp. | 7.80% | 7.54% | 11.15% | — | — | |
| Uber Technologies Inc. | 15.33% | -55.79% | -5.09% | — | — | |
| Union Pacific Corp. | 12.28% | 13.87% | 13.09% | — | — | |
| United Airlines Holdings Inc. | 10.59% | 6.49% | -1.52% | — | — | |
| United Parcel Service Inc. | 16.77% | 28.42% | 34.07% | — | — | |
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 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,815 ÷ 30,476 = 9.24%
4 Click competitor name to see calculations.
The Return on Invested Capital (ROIC) exhibits a volatile but recovering trajectory over the observed five-year period, characterized by a severe contraction followed by a steady return toward baseline levels.
- Net Operating Profit After Taxes (NOPAT)
- Operational profitability experienced a drastic decline, moving from 3,350 million USD in 2019 to a significant deficit of 10,143 million USD in 2020. A recovery trend emerged in 2021 as losses narrowed to 736 million USD, followed by a return to profitability in 2022 with 2,040 million USD and further growth to 2,815 million USD by the end of 2023.
- Invested Capital
- The total invested capital showed a general contraction from 2019 to 2021, decreasing from 35,495 million USD to 29,074 million USD. In the subsequent two years, the capital base stabilized, remaining within a narrow range between 30,476 million USD and 30,859 million USD.
- Return on Invested Capital (ROIC) Analysis
- The ROIC mirrored the volatility of operational profits, dropping sharply from 9.44% in 2019 to -32.29% in 2020. A consistent upward trend is observable from 2021 onward, with the ratio improving to -2.53% in 2021, 6.61% in 2022, and reaching 9.24% in 2023. This progression indicates that the efficiency of capital utilization has nearly recovered to its 2019 level, driven primarily by the restoration of positive net operating profits.
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Decomposition of ROIC
American Airlines Group Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The return on invested capital (ROIC) experienced a severe contraction between 2019 and 2020, falling from 9.44% to -32.29%, followed by a consistent multi-year recovery. By December 31, 2023, ROIC reached 9.24%, nearly returning to pre-pandemic levels. This trajectory reflects a cyclical recovery driven by improvements in both operational profitability and asset utilization.
- Operating Profit Margin (OPM)
- Operational profitability served as the primary driver of ROIC volatility. A precipitous decline is noted in 2020, where the margin dropped to -56.50%, coinciding with the lowest point of ROIC. A steady upward trend followed, with margins returning to positive territory by 2022 (5.16%) and reaching 6.18% by 2023. Although the 2023 margin remains below the 2019 level of 7.98%, the recovery in OPM was essential for the restoration of positive returns.
- Turnover of Capital (TO)
- Capital turnover exhibited a V-shaped recovery with subsequent growth beyond baseline levels. After falling from 1.29 in 2019 to 0.55 in 2020, the ratio improved consistently each year, peaking at 1.73 in 2023. This indicates that the company has significantly increased its efficiency in generating revenue from its invested capital base, surpassing its 2019 efficiency levels. The growth in turnover acted as a critical offset to the slower recovery of operating margins.
- Effective Cash Tax Rate (CTR)
- The impact of taxes on ROIC remained relatively stable, though adjustments are evident during loss-making years. The value of 1 minus the effective cash tax rate reached 100% in 2020 and 2021, reflecting the absence of cash tax payments during periods of negative operating profit. In the recovery phase, this figure settled at 80.78% in 2022 and 86.21% in 2023, indicating a return to standard tax obligations as profitability resumed.
- Synthesis of ROIC Decomposition
- The recovery of ROIC to 9.24% by 2023 is the result of a dual-pronged improvement in efficiency and profitability. While operating margins have not yet fully returned to 2019 levels, the substantial increase in the turnover of capital (from 1.29 to 1.73) has more than compensated for the margin gap, allowing the company to achieve a nearly identical return on invested capital compared to the start of the analyzed period.
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Operating Profit Margin (OPM)
American Airlines Group Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,815) | 2,040) | (736) | (10,143) | 3,350) | |
| Add: Cash operating taxes2 | 450) | 485) | 482) | 348) | 303) | |
| Net operating profit before taxes (NOPBT) | 3,265) | 2,526) | (255) | (9,795) | 3,653) | |
| Operating revenues | 52,788) | 48,971) | 29,882) | 17,337) | 45,768) | |
| Profitability Ratio | ||||||
| OPM3 | 6.18% | 5.16% | -0.85% | -56.50% | 7.98% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| FedEx Corp. | 7.32% | 6.41% | 9.60% | — | — | |
| Uber Technologies Inc. | 7.09% | -27.42% | -2.86% | — | — | |
| Union Pacific Corp. | 39.71% | 41.70% | 44.40% | — | — | |
| United Airlines Holdings Inc. | 9.41% | 6.69% | -1.70% | — | — | |
| United Parcel Service Inc. | 10.43% | 15.59% | 17.83% | — | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Operating revenues
= 100 × 3,265 ÷ 52,788 = 6.18%
4 Click competitor name to see calculations.
The operational performance between 2019 and 2023 is characterized by a profound contraction followed by a consistent multi-year recovery in both top-line revenue and operating profitability.
- Revenue Trends
- Operating revenues experienced a sharp decline in 2020, falling to 17,337 million USD from 45,768 million USD in 2019. Following this trough, a sustained recovery is observed, with revenues climbing to 29,882 million USD in 2021, 48,971 million USD in 2022, and reaching a peak of 52,788 million USD by the end of 2023, effectively exceeding pre-2020 levels.
- Operating Profitability (NOPBT)
- Net operating profit before taxes shifted from a positive 3,653 million USD in 2019 to a significant deficit of 9,795 million USD in 2020. A steady trend toward recovery followed, with losses narrowing to 255 million USD in 2021 before returning to profitability in 2022 at 2,526 million USD and further expanding to 3,265 million USD in 2023.
- Operating Profit Margin (OPM) Dynamics
- The operating profit margin reflects extreme volatility, plummeting from 7.98% in 2019 to -56.50% in 2020. A consistent upward trajectory is evident in the subsequent years, with the margin improving to -0.85% in 2021, 5.16% in 2022, and 6.18% in 2023. Although the margin shows a clear recovery trend, it remains below the 2019 benchmark, suggesting that while operational viability has been restored, the efficiency levels have not yet fully returned to previous peaks.
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Turnover of Capital (TO)
American Airlines Group Inc., TO 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) | ||||||
| Operating revenues | 52,788) | 48,971) | 29,882) | 17,337) | 45,768) | |
| Invested capital1 | 30,476) | 30,859) | 29,074) | 31,408) | 35,495) | |
| Efficiency Ratio | ||||||
| TO2 | 1.73 | 1.59 | 1.03 | 0.55 | 1.29 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| FedEx Corp. | 1.30 | 1.41 | 1.31 | — | — | |
| Uber Technologies Inc. | 2.38 | 1.95 | 1.09 | — | — | |
| Union Pacific Corp. | 0.39 | 0.42 | 0.37 | — | — | |
| United Airlines Holdings Inc. | 1.19 | 1.10 | 0.47 | — | — | |
| United Parcel Service Inc. | 2.00 | 2.24 | 2.19 | — | — | |
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 Invested capital. See details »
2 2023 Calculation
TO = Operating revenues ÷ Invested capital
= 52,788 ÷ 30,476 = 1.73
3 Click competitor name to see calculations.
The analysis of capital efficiency reveals a significant volatility cycle followed by a strong recovery and expansion in asset utilization. Between 2019 and 2023, a clear correlation is observed between the restoration of operating revenues and the subsequent improvement in the turnover of capital ratio.
- Operating Revenues
- A sharp contraction occurred in 2020, with revenues falling to 17,337 million US$ from 45,768 million US$ in 2019. This was followed by a consistent upward trajectory; revenues surpassed pre-pandemic levels by 2022 and reached a peak of 52,788 million US$ by the end of 2023.
- Invested Capital
- Invested capital showed a general decline from 35,495 million US$ in 2019 to a minimum of 29,074 million US$ in 2021. The capital base remained relatively stable in the subsequent years, closing at 30,476 million US$ in 2023, representing a reduction in the total capital employed compared to the 2019 baseline.
- Turnover of Capital (TO)
- The turnover of capital ratio experienced a severe drop to 0.55 in 2020, reflecting a period of diminished asset productivity. A robust recovery followed, with the ratio returning to 1.03 in 2021 and climbing to 1.73 by 2023. The increase from 1.29 in 2019 to 1.73 in 2023 indicates a substantial improvement in the efficiency of generating revenue relative to the invested capital base.
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Effective Cash Tax Rate (CTR)
American Airlines Group Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,815) | 2,040) | (736) | (10,143) | 3,350) | |
| Add: Cash operating taxes2 | 450) | 485) | 482) | 348) | 303) | |
| Net operating profit before taxes (NOPBT) | 3,265) | 2,526) | (255) | (9,795) | 3,653) | |
| Tax Rate | ||||||
| CTR3 | 13.79% | 19.22% | — | — | 8.30% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| FedEx Corp. | 17.83% | 16.39% | 11.08% | — | — | |
| Uber Technologies Inc. | 9.17% | — | — | — | — | |
| Union Pacific Corp. | 21.09% | 20.10% | 21.23% | — | — | |
| United Airlines Holdings Inc. | 5.37% | 11.59% | — | — | — | |
| United Parcel Service Inc. | 19.63% | 18.63% | 12.80% | — | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 450 ÷ 3,265 = 13.79%
4 Click competitor name to see calculations.
Financial performance exhibited significant volatility between 2019 and 2023, characterized by a severe contraction in net operating profit before taxes (NOPBT) followed by a phased recovery. Despite these fluctuations in profitability, cash operating tax payments remained consistently positive and generally trended upward from 2019 through 2022 before a slight decline in 2023.
- Net Operating Profit Before Taxes (NOPBT)
- A substantial decline occurred in 2020, where NOPBT dropped from US$ 3,653 million in 2019 to a loss of US$ 9,795 million. This negative trajectory persisted into 2021, though the loss narrowed significantly to US$ 255 million. A return to profitability was achieved in 2022 with US$ 2,526 million, further increasing to US$ 3,265 million by the end of 2023.
- Cash Operating Taxes
- Cash tax expenditures demonstrated a decoupling from annual operating profit. While NOPBT fell sharply in 2020 and 2021, cash taxes increased from US$ 303 million in 2019 to US$ 348 million and US$ 482 million in those respective years. Tax payments peaked in 2022 at US$ 485 million before receding slightly to US$ 450 million in 2023.
- Effective Cash Tax Rate (CTR)
- The CTR was not applicable during the loss-making years of 2020 and 2021. Upon the return to profitability in 2022, the CTR was recorded at 19.22%, representing a significant increase from the 8.30% observed in 2019. In 2023, the rate moderated to 13.79%, indicating a reduction in the proportion of cash taxes paid relative to the growth in NOPBT.
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