American Airlines cuts second-quarter profit forecast
Is American Airlines Losing Its Altitude?
American Airlines has reduced its second-quarter profit forecast due to decreased pricing power, resulting in an 8% drop in its shares in aftermarket trading. The airline now anticipates earnings between $1.00 and $1.15 per share, a decrease from the previously projected $1.15 to $1.45 per share. Additionally, Chief Commercial Officer Vasu Raja is set to depart in June.
Despite expectations of record summer travel demand, American's revenue per available seat mile is expected to decline by 5% to 6% year-over-year. This contrasts with United Airlines, which has maintained its earnings forecast. Analysts express concerns about American's strategic shifts away from corporate travel to focus on smaller markets, questioning the potential revenue impact compared to competitors like United and Delta.
By what percentage does American Airlines expect its total revenue per available seat mile to decrease, and how does this compare to earlier expectations?
American Airlines now expects its total revenue per available seat mile (RASM) to decrease by about 5% to 6% from a year ago2. This marks a downward revision from its earlier expectations, which anticipated a smaller decline in RASM of 1% to 3%. This adjustment indicates a decrease in the airline's pricing power compared to previous forecasts.
How much did American Airlines' shares decline in aftermarket trading following the announcement of the revised profit forecast?
American Airlines' shares declined by about 8% in aftermarket trading following the announcement of the revised profit forecast.