American Airlines Stock Plummets on Disappointing Outlook
American Airlines faced a significant setback on Thursday as its first-quarter earnings outlook missed the mark set by analysts, causing its shares to plummet by nearly 9%. The carrier projected an adjusted loss per share ranging from 20 cents to 40 cents for the initial three months of 2025, attributing the wider loss to current demand trends and fuel price forecasts. This figure fell short of the 4 cents per share that analysts had anticipated, according to LSEG reports.
Contrary to the optimistic forecasts delivered by its competitors United and Delta earlier this month, American Airlines’ outlook for the upcoming period was overshadowed by anticipated challenges. The company expects its unit costs, excluding fuel, to rise by low-single-digit percentage points in the first quarter of 2024. This increase is driven by factors such as lower capacity, a potential drop of up to 2% from the previous year, an increased mix of regional jet flying, and the finalization of new labor agreements in the preceding year.
Despite these setbacks, American Airlines maintains a full-year earnings forecast ranging between $1.70 and $2.70, aligning with the estimates put forth by analysts. The airline spent the past year navigating the aftermath of a flawed business travel sales strategy that promoted direct bookings over travel agencies, a misstep that cost the company an estimated $1.5 billion in revenue for the year 2024. However, the recent renegotiation of a credit card deal with partner Citi has provided a much-needed boost, with compensation from existing partnerships demonstrating a 17% increase to $6.1 billion in the past year.
CEO Robert Isom expressed confidence in the company’s future prospects, citing the strength of American Airlines’ network, loyalty programs, co-branded credit cards, fleet, and operational reliability as key factors contributing to its resilience. American Airlines anticipates a revenue growth of 3% to 5% in the first quarter of 2025 compared to the same period in 2024, with a potential increase of up to 7.5% for the full year.
In the fourth quarter, American Airlines exceeded Wall Street expectations compiled by LSEG:
– Earnings per share: 86 cents adjusted vs. 64 cents forecasted
– Revenue: $13.66 billion vs. $13.40 billion expected
The airline reported a fourth-quarter profit surge to $590 million from $19 million, fueled by a 4.6% increase in sales to $13.66 billion. Both domestic and international revenue witnessed growth, with a notable spike in trans-Pacific revenue. Adjusted for one-time items, American Airlines earned 86 cents per share, surpassing analyst projections. Special items from the previous year, such as labor contract impacts, regional aircraft write-downs, and senior debt adjustments, contributed to these results.
As American Airlines navigates the challenges ahead, its resilience and strategic initiatives position the company for a promising future despite the recent setback in its stock performance.
