American Airlines’ Earnings Outlook Falls Short of Expectations
Disappointing First-Quarter Forecast
American Airlines’ recent earnings outlook has sent shockwaves through the industry, with shares plummeting by roughly 10% after the carrier’s forecast fell short of analysts’ estimates. The airline predicts an adjusted loss per share of 20 cents to 40 cents for the first quarter of 2025, a wider loss than the 4 cents analysts were expecting.
Rising Unit Costs and Lower Capacity
The airline attributes this forecast to rising unit costs, excluding fuel, which are expected to increase in the low-single digit percentage points over the first quarter of 2024. This is largely due to lower capacity, which is expected to fall by as much as 2% compared to last year, as well as a higher mix of smaller, regional-jet flying and new labor agreements finalized last year.
A Contrasting Outlook
This earnings outlook stands in stark contrast to the more optimistic forecasts from rivals United and Delta earlier this month. However, American’s full-year earnings forecast of between $1.70 and $2.70 is in line with analysts’ estimates.
Reversing Course and Sealing New Deals
American has spent the last year reversing a business-travel sales strategy that backfired, but it has also sealed a new credit card deal with its partner Citi. Compensation from its existing deals with Citi and Barclays rose 17% from 2023 to $6.1 billion last year.
CEO’s Optimistic Outlook
Despite the disappointing earnings outlook, CEO Robert Isom remains optimistic about the airline’s prospects. “As we look ahead to this year, American remains well-positioned because of the strength of our network, loyalty and co-branded credit card programs, fleet and operational reliability, and the tremendous work of our team,” he said in a news release.
Revenue Expectations
American expects revenue to increase between 3% to 5% in the first quarter compared to the same period in 2024, and up to 7.5% for the full year compared to 2024.
Fourth-Quarter Performance
In the fourth quarter, American’s profit rose to $590 million from $19 million on sales that were up 4.6% on the year to $13.66 billion. Both domestic and international revenue rose, led by a surge in trans-Pacific revenue.
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