American Airlines Group Inc on Wednesday forecasted first-quarter profit below market expectations, joining rival United Airlines in signaling a hit from persistently high labor and fuel costs. The dull outlook pushed its shares to close 9.2% lower on Wednesday and weighed on those of other major U.S. airlines, which are set to report results this month, starting with Delta Air Lines on Thursday.
Higher fares amid rising global travel have so far helped the airline industry offset a hit from fuel and labor costs, but rising borrowing costs, inflation, and job losses have sparked worries about demand. American's first-quarter guidance came in "mostly at the mid-points" of the initial set of forecasts it had issued in January, Raymond James analyst Savanthi Syth said. "We had expected American to come in towards the better end in a similar manner as JetBlue's guidance update provided in mid-March," Syth added.
The airline industry has been able to survive the broader economic slowdown in the United States, thanks also to tight airline capacity due to shortages of aircraft and spare parts. American said it expected total revenue per available seat mile, a proxy for pricing power, to be up about 25.5% in the first quarter from a year earlier. On an adjusted basis, it forecast a quarterly per-share profit of between 1 cent and 5 cents, compared with its previous forecast of a near break-even. Analysts were expecting a profit of 6 cents per share, according to Refinitiv data.
The carrier also slightly trimmed its fuel price forecast to $3.27 to $3.32 per gallon for the first quarter from its prior estimate of $3.33 to $3.38 per gallon. It had paid $2.80 per gallon in the first quarter of last year. Southwest Airlines Co closed down 1.4%, United was down 6.5% and Delta was down 2.4%.