An American Airlines jet taxis at the Los Angeles International Airport, on April 12, 2024.Damian Dovarganes/The Associated Press
American Airlines AAL-Q forecast 2025 profit below Wall Street expectations as the carrier braces for higher costs stemming from expensive labour contracts signed last year, sending its shares down 8 per cent on Thursday.
The airline also forecast a bigger first-quarter loss than analysts expected, breaking away from the bumper predictions of rivals such as Delta Air Lines DAL-N and United Airlines UAL-Q that are benefiting from improved pricing and strong winter demand.
“We expect nonfuel unit costs to be up mid-single digits year over year with a large majority of the cost growth coming from higher salaries and benefits,” CFO Devon May said during its earnings call.
The company in September ratified a new five-year deal with 28,000 of its flight attendants, offering wage increases of up to 20.5 per cent along with retroactive pay. It also signed a two-year contract extension in October with a worker group including aircraft maintenance technicians, cleaners and planners.
American spent much of 2024 mending relationships with corporate travellers after a botched sales strategy aimed at cutting back on perks and discounts dented the airline’s revenue, hurt its image and gave rivals an edge.
Shares of Delta jumped nearly 50 per cent last year while United surged 138 per cent, far above American’s gains of about 30 per cent.
The legacy carrier expects 2025 adjusted earnings per share of $1.70 to $2.70, compared with analysts’ average estimates of $2.42, according to data compiled by LSEG.
Jet fuel prices have also climbed sharply in the past month, tracking a rise in global crude benchmarks driven by broader sanctions targeting Russian oil revenue, alongside growing optimism about stronger demand from China.
The company expects current-quarter adjusted loss per share of 20 cents to 40 cents, compared with estimates for a loss of 4 cents.
“As such, 2025 EPS guidance with a $2.20 midpoint looks conservative, considering that the carrier just resoundingly beat its own 4Q EPS guide,” Citi analyst Stephen Trent wrote in a note.
The Texas-based carrier reported an adjusted profit of 86 cents per share, beating expectations of 64 cents, due to improved pricing.
Total operating revenue rose 4.6 per cent to about $13.66-billion, above estimates of $13.39-billion.