American Airlines scales back 2025 profit outlook as third-quarter forecast falls short

Key Concepts:

• American Airlines (AAL) quarterly results
• Earnings per share (EPS)
• Revenue
• Domestic revenue per seat mile
• International revenue per seat mile
• Operating margin
• Free cash flow
• Guidance (Q3 and full year)
• Street estimates

American Airlines Q1 2024 Earnings Report

American Airlines has released its quarterly results, showing a mixed performance with a beat on both revenue and earnings per share (EPS), but with concerning guidance for the upcoming periods.

Financial Performance:

• EPS: The company reported an EPS of $0.91, surpassing the analyst estimate of $0.78 per share.
• Revenue: Revenue came in slightly above expectations at $14.39 billion.
• Domestic Revenue per Seat Mile: Experienced a decrease of 6.4% compared to Q2 of the previous year. This trend has been observed across the airline industry.
• International Revenue per Seat Mile: Showed strength, increasing by 2.7% compared to Q2 of 2023.
• Operating Margin: Was 8.2%, down from 9.7% in the same quarter last year.
• Free Cash Flow: Q2 free cash flow was reported at $791 million.

Guidance and Market Reaction:

• Q3 Guidance: The company projects a loss between $0.10 and $0.60 per share. This is less optimistic than the Street's estimate of a $0.07 loss per share.
• Full Year Guidance: A very wide range is provided, projecting either a loss of $0.20 per share or earnings of $0.80 per share. The Street's current estimate is earnings of $0.61 per share.
• Market Reaction: Shares of American Airlines are under pressure, likely due to the wider-than-expected guidance.

Analysis and Future Discussion:

The wide guidance range provided by American Airlines is a key point of concern. The reasons behind this wide range, particularly regarding domestic and international performance, will be discussed in an upcoming interview with Robert Isom, CEO of American Airlines. The interview will explore the factors influencing the company's outlook and the strategies to navigate the current market conditions.

Conclusion:

American Airlines' Q2 results present a mixed picture. While the company beat expectations on both EPS and revenue, the weak guidance for Q3 and the full year is causing concern among investors. The upcoming interview with the CEO should provide more clarity on the factors driving the company's outlook and its plans to address the challenges ahead.