American Airlines Cuts 2023 Profit Forecast Amid Rising Costs and Softening Demand

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. 


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. 

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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. 

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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.

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