Shares of American Airlines saw a significant drop of nearly 9% on Thursday after the airline released its first-quarter earnings outlook, which failed to meet analysts’ expectations.
Disappointing Forecast Leads to Decline in Shares
The airline projected an adjusted loss per share of between 20 cents and 40 cents for the first quarter of 2025, which is a wider loss than the 4 cents analysts had predicted, according to data from LSEG. This disappointing forecast was based on current demand trends and anticipated fuel price fluctuations.
American Airlines also forecast that its unit costs, excluding fuel, would rise in the low-single-digit percentage points during the first quarter. This increase was attributed to several factors, including lower capacity, which is expected to decrease by as much as 2% compared to last year, a higher proportion of regional jet flights, and new labor agreements finalized last year.
Contrasting Outlook with Competitors
The outlook for the first quarter stands in stark contrast to more optimistic projections made by American Airlines’ competitors, such as United and Delta, earlier in the month. However, the airline’s full-year earnings forecast, ranging from $1.70 to $2.70 per share, aligns with analysts’ estimates.
Reversal of Failed Strategy
In 2024, American Airlines worked to recover from the fallout of a business travel sales strategy that had focused on direct bookings instead of working with travel agencies. This approach was eventually abandoned after it failed to deliver the expected results. The company has since estimated that this strategy would cost it $1.5 billion in revenue in 2024.
Despite this setback, American Airlines secured a new credit card deal with its partner, Citi. Compensation from its credit card partnerships with Citi and Barclays rose by 17% year-over-year, totaling $6.1 billion in 2024.
Positive Outlook Despite Setbacks
Despite the challenges, American Airlines remains confident in its future. CEO Robert Isom expressed optimism about the company’s position moving forward, citing the strength of its network, loyalty programs, co-branded credit card partnerships, fleet, and operational reliability. He emphasized the dedication of the team and the company’s focus on maintaining its position in the market.
Revenue Growth and Projections
American Airlines expects to see a 3% to 5% increase in revenue during the first quarter compared to the same period in 2024. For the full year, the airline projects revenue to rise by as much as 7.5% compared to 2024.
Strong Fourth-Quarter Performance
In its fourth-quarter results, American Airlines posted earnings that exceeded analysts’ expectations. The company reported adjusted earnings of 86 cents per share, higher than the 64 cents predicted by analysts. The airline’s revenue for the fourth quarter totaled $13.66 billion, surpassing the expected $13.40 billion.
American Airlines’ profit for the fourth quarter rose to $590 million, a significant increase from the $19 million profit the company reported during the same period last year. The growth in sales, which rose by 4.6% year-over-year, was driven by increases in both domestic and international revenue, with trans-Pacific revenue seeing a particularly strong surge.
After adjusting for one-time items, such as the impact of labor contracts and the write-down of certain regional aircraft, American Airlines earned 86 cents per share, surpassing analysts’ expectations. These special items also included adjustments related to senior debt.
In summary, while American Airlines faces challenges in the short term with its first-quarter outlook, the company remains confident in its long-term prospects and is seeing positive results from its fourth-quarter performance.
