American Airlines Forecasts Wider Q1 Loss, Shares Drop

American Airlines has revised its first-quarter earnings outlook, forecasting a wider-than-expected loss, which caused its shares to drop nearly 9%. The airline projected an adjusted loss per share of 20 cents to 40 cents for the first three months of 2025, much larger than the 4-cent loss analysts had anticipated.

The airline cited current demand trends and fuel price forecasts as contributing factors to the negative outlook. Additionally, it expects unit costs, excluding fuel, to rise in the low single-digit percentage points in Q1 due to lower capacity, which is projected to decrease by as much as 2% compared to the previous year. The airline also mentioned a higher mix of regional jet flying and new labor agreements as contributing to increased costs.

In contrast, rivals United and Delta Airlines reported more optimistic forecasts earlier this month. However, American’s full-year earnings guidance of $1.70 to $2.70 per share is aligned with analysts’ expectations.

American spent much of 2024 working to recover from the impact of a failed business travel strategy that pushed for direct bookings instead of using travel agencies. The strategy cost the airline an estimated $1.5 billion in revenue, leading to its abandonment. On a more positive note, American finalized a new credit card deal with Citi late last year, which resulted in a 17% increase in compensation from its deals with Citi and Barclays, bringing in $6.1 billion in 2024.

CEO Robert Isom expressed confidence in the airline’s position, citing the strength of its network, loyalty programs, co-branded credit card partnerships, fleet, and operational reliability as key factors for the airline’s future success. American forecasted a 3% to 5% increase in revenue for Q1 2025 compared to the same period in 2024 and expects a 7.5% revenue increase for the full year compared to 2024.

In the fourth quarter of 2024, American Airlines reported a profit of $590 million, up from $19 million in the same quarter the previous year. Revenue rose by 4.6% year-over-year to $13.66 billion, surpassing Wall Street estimates. Both domestic and international revenue increased, with significant growth seen in trans-Pacific routes. Adjusted earnings for the fourth quarter were 86 cents per share, exceeding analyst expectations.

While American Airlines continues to face challenges in the short term, its recovery efforts and strategic partnerships are aimed at strengthening its position in the competitive airline industry.

Sources: AirGuide Business airguide.info, bing.com, cnbc.com