On Thursday, American Airlines reduced its adjusted profit forecast for 2023 due to the challenges posed by increasing jet fuel prices and costly labor contracts, leading to a 1.5% drop in its shares during premarket trading.
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The airline now anticipates an adjusted profit ranging from $2.25 to $2.50 per share for the year, a decrease from the previously projected $3 to $3.75 per share. The industry’s profitability trajectory is under threat due to escalating costs and early indications of slowing domestic travel demand, triggering a sell-off in airline stocks and causing analysts to cut their earnings predictions.
In August, American Airlines cautioned that costs for the third quarter would increase as a result of a new labor agreement with its pilots, which includes over $9.6 billion in total pay and benefits hikes over a four-year period. The company projects that its total revenue per available seat mile (TRASM), an indicator of pricing power, will fall by approximately 5.5% to 7.5% in the fourth quarter compared to the same period last year.
For the third quarter ending September 30, it reported a net loss of $545 million, or 83 cents per share, a stark contrast to the profit of $483 million, or 69 cents per share, recorded in the same period last year.
