American Airlines restored its full-year outlook but provided broad guidance ranges to show the unpredictability of domestic travel demand. The airline predicts its adjusted earnings will fall between 80 cents and negative 20 cents per share because of declining consumer spending and economic challenges.
CEO Robert Isom stated that domestic travel demand faces challenges but the market trends might start improving during August or September. The airline reported a 6.4% decrease in domestic unit revenue during the second quarter but international flights showed better results with transatlantic markets increasing by 5%.
The stock price declined by more than 9% after investors processed the company’s conservative outlook. The airline’s forecast stands in opposition to Delta United and Alaska Air’s more positive guidance because these airlines have experienced better pricing and passenger volume recovery.
The U.S. airline industry including American Airlines had previously eliminated financial guidance because of trade-related market instability. The combination of consumer sentiment reduction from tariffs and the need for fare reductions to achieve summer peak seating capacity threatens airline profitability.
The airline predicts a third-quarter loss between 60 cents and zero per share. The airline expects non-fuel operating costs to rise by as much as 4.5% which will reduce its profit margins.
