American Airlines posted a $545 million loss for the third quarter as revenue was flat with last summer and costs rose, especially to cover a new contract with its pilots.
American on Thursday cut its forecast of full-year earnings to between $2.25 and $2.50 per share, down from a previous forecast of $3 to $3.75 per share.
Recommended Videos
Wall Street had already discounted the airline’s earning potential as jet fuel prices continue to creep higher: Analysts were expecting full-year profit of $2.34 per share even before American’s new forecast.
The third-quarter results contrasted with those of American's two closest rivals. United Airlines and Delta Air Lines both reported rising revenue and profit of $1.1 billion for the quarter, which spans much of the peak vacation-travel season.
Travel has been booming coming out of the pandemic. Last year, Americans snapped up tickets for travel within the United States; this year, a lucrative chunk of that demand has shifted to international flights.
With its revenue flat compared with a year ago, American appears to be rethinking its development of new routes, which often take time to become profitable — and sometimes never do.
“We know there are things that we could have done differently over the past summer that we're going to make sure that we are addressing in terms of where we are flying and how we are doing it,” CEO Robert Isom said on a call with analysts. American will have “very little tolerance” for developmental routes, he said. “We're going to fly where we make money.”
Executives said that demand for travel remains strong, and they expect holiday bookings to beat last year’s numbers.
American's third-quarter loss compared with a profit of $483 million in the same quarter last year. The airline said the results were dragged down by $983 million in charges for contract-ratification bonuses paid to pilots in August.
American Airlines Group Inc., based in Fort Worth, said earnings excluding special items worked out to 38 cents per share. Analysts expected 25 cents per share, according to a FactSet survey.
Revenue of $13.48 billion was slightly below Wall Street forecasts and flat with last summer. By contrast, United and Delta reported revenue gains of 12% and 11%.
American's chief financial officer, Devon May, said it was a matter of timing — that American grew more quickly last year, but this year, United and Delta "were catching up” and added more flights that boosted revenue.
Labor costs at American jumped 17%, an increase of nearly $600 million, which was roughly offset by lower fuel prices than a year ago.
American expects to pay $3.01 to $3.11 a gallon for fuel in the fourth quarter, up from $2.91 in the third.
Fuel prices are still lower than they were last year, but American's price outlook could add to anxiety over burdensome costs across the industry.
Citing rising fuel prices on Wednesday, United gave a surprisingly weak end-of-year forecast after a solid third quarter, sending shares of the major carriers lower. United also noted the suspension of its flights to Tel Aviv because of the Israel-Hamas war.
American, which took on new debt during the pandemic, said it paid down $1.4 billion in debt during the quarter.
Shares of American closed up less than 1% Thursday after losing 5% Wednesday and falling near a three-year low.