Following its earnings report, the Fort Worth, Texas-based carrier said consumer spending is being hampered by the general economic uncertainty. It also provided a wide range for its full-year forecast on Thursday. Financial guidance for the airline had been suspended in April.
According to the airline, it anticipates a 20 cent per share loss to an 80 cent per share profit in 2025. Compared to analysts’ consensus of 61 cents per share, the forecast’s midpoint is 30 cents per share, according to LSEG data.
American, which makes up more than two-thirds of its passenger revenue from the domestic market, predicted to reach the top of its forecast if domestic demand increases. However, it only anticipates being at the bottom of the forecast if the economy deteriorates.
On an earnings call, CEO Robert Isom stated to analysts that the domestic network has been put under pressure due to the uncertainty in the economy and the reluctance of domestic passengers to travel.
American reported that its bookings decreased in July as a result of a weak domestic travel demand. However, Isom claimed that the performance is anticipated to increase in August and September sequentially.
He said, “We anticipate that July will be the low point.”
The company anticipates that the third quarter’s domestic unit revenue, or the revenue generated by each seat, will remain lower than expected. Operating costs for non-essential goods are thought to have increased by up to 4.5 percent in the September quarter.
According to LSEG’s data, American anticipates an adjusted loss per share in the range of 10 cents to 60 cents in the third quarter, compared to analysts’ predictions of a loss of 7 cents.
The company’s outlook contrasts with that of its rivals United Airlines and Delta, who have optimistic outlooks. Alaska Air Group has also reported improved pricing and passenger traffic.
Since President Donald Trump’s trade war left the industry in the most uncertain shape since the COVID-19 pandemic, the majority of US airlines withdrew their financial forecasts in April. Some people have reined their expectations, but there is still uncertainty about how the economy will fare in a constantly changing tariff landscape.
Budget travelers approach their plans with caution, which hurts carriers that primarily serve the US domestic market and price-sensitive customers, as demand has remained low in the domestic travel market.
Even the summer, which is typically the airline industry’s busiest season, is slipping this year because of the low demand for standard economy seats.
Southwest Airlines, the largest domestic airline in the US, lost ground due to it in the second quarter.
The domestic market at American experienced the weakest results in the second quarter, with unit sales falling by 6.4 percent from the same period last year. The transatlantic market saw a 5% annual increase in the company’s unit revenue, which increased.
Source: Aljazeera
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