American Airlines restores economic forecast amid economic uncertainty
The Fort Worth, Texas-based carrier on Thursday offered a wide range for its full-year forecast on the heels of its earnings report, saying the broader economic uncertainty is hobbling consumer spending. The airline had suspended financial guidance in April.
The airline says it expects an adjusted loss per share of 20 cents a share to a profit of 80 cents a share in 2025. The midpoint of the forecast is 30 cents per share, compared with analysts' average estimate of 61 cents a share, according to LSEG data.
American, which generates more than two-thirds of its passenger revenue from the US domestic market, said that if domestic travel demand continues to strengthen, it expects to hit the top end of its outlook. But if the economy weakens, it only expects to be at the bottom end of the forecast.
'The domestic network has been under stress because of the uncertainty in the economy and the reluctance of domestic passengers to get in the game,' CEO Robert Isom told analysts on an earnings call.
American said tepid domestic travel demand affected its bookings in July. Isom, however, said the performance is expected to improve sequentially in August and September.
'We expect that July will be the low point,' he said.
The company expects its domestic unit revenue, or revenue generated from each seat, to remain lower year-over-year in the third quarter. Its non-fuel operating costs are estimated to be up as much as 4.5 percent in the September quarter.
American expects an adjusted loss per share in the range of 10 cents to 60 cents in the third quarter, compared with analysts' estimates of a loss of 7 cents, according to data compiled by LSEG.
The company's outlook contrasts with upbeat forecasts of rival Delta and United Airlines. Alaska Air Group has also reported improvements in passenger traffic and pricing power.
Most US airlines withdrew their financial forecasts in April as President Donald Trump's trade war created the biggest uncertainty for the industry since the COVID-19 pandemic. While some have reinstated their expectations, there is lingering uncertainty as to how the economy will fare in an ever-evolving tariff landscape.
Demand in the domestic travel market has remained subdued, with budget travellers approaching their plans with caution, hurting carriers that primarily service the US domestic market and price-sensitive customers.
Even summer, typically the peak money-making season for airlines, is falling short this year, with unsold standard economy seats forcing carriers to cut fares.
It dented the second-quarter earnings of Southwest Airlines, the largest US domestic airline.
At American, the domestic market was the weakest in the second quarter, with its unit revenue declining 6.4 percent from a year ago. The company's unit revenue in international markets was up, led by a 5 percent annual jump in the transatlantic market.
On Wall Street, the stock is taking a hit and was down 7.2 percent from the market open as of 11:30am in New York (15:30 GMT).
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