American Airlines shares plunged nearly 10% on Thursday after the company's third-quarter profit forecast fell short of Wall Street expectations and its 2025 financial forecast was significantly lower than anticipated at the beginning of the year.
CEO Robert Isom, speaking on "Squawk Box," attributed the decline to consumer weakness, persistently weak business travel demand at the start of the summer, and operational issues caused by a series of storms.
"July was a tough month...because of domestic consumer weakness," Isom said.
He said demand appears to improve in the coming months and that American is scaling back capacity growth.
Delta Airways and United Airlines said earlier this month that travel demand has stabilized, but both airlines issued lower 2025 forecasts than at the beginning of the year.
American Airlines on Thursday forecast adjusted losses or earnings per share of up to 20 cents or as much as 80 cents for 2025, down from its January forecast of adjusted earnings per share of $1.70 to $2.70. American and other airlines in April withdrew their 2025 financial outlooks as airlines faced volatile tariffs and weaker-than-expected domestic demand.
For the third quarter, American said it expects an adjusted per-share loss of 10 cents to 60 cents, while analysts polled by LSEG estimated a 7-cent loss.
The airline said in an earnings release that it only expects the low end of its forecast if “there were to be macro weaknesses that are not seen today” and the high end if the domestic travel market continues to improve.
Domestic travel demand has been a weak spot this year, though many U.S. travelers have continued to fly abroad in droves to popular destinations like Japan and Italy. American’s passenger revenue per available domestic seat mile, a pricing power gauge, was down more than 6% in the second quarter, while it was up nearly 3% for international.
Here is how American performed in the second quarter compared with Wall Street estimates compiled by LSEG:
In the three months ended June 30, American’s revenue rose 0.4% to $14.39 billion, ahead of expectations, while net income dropped 16.5% to $599 million, or 91 cents a share. Adjusting for one-time items, American posted earnings of $628 million, or 95 cents a share, well ahead of analysts’ expectations.