American Airlines forecasts stronger fourth-quarter profit on travel demand

AMERICAN Airlines on Thursday (Oct 20) forecast that fourth-quarter profit would exceed analyst estimates after posting better-than-expected earnings in the third quarter, as demand for travel remained resilient despite higher airfare and growing risks of an economic recession.

The Texas-based carrier expects adjusted profit between 50 and 70 cents per share for the fourth quarter through December, compared with analysts’ estimate for 22 cents per share, according to Refinitiv IBES data.

Total revenue in the fourth quarter is projected to be up 11 per cent to 13 per cent from the same period in 2019, while capacity is estimated to be down 5 per cent to 7 per cent.

“Demand remains strong, and it’s clear that customers continue to value air travel and the ability to reconnect post-pandemic,” chief executive Robert Isom said in statement.

The company’s shares were up about 3 per cent at US$14.43 in premarket trading.

American is the latest airline to provide an upbeat forecast even as a worsening economic outlook has sparked worries about travel spending.

The airline industry, which is facing higher fuel and wage bills, has been relying on robust demand to mitigate inflationary pressure with higher fares. Investors are concerned that a slowdown in consumer spending would hurt profits and make it harder for debt-laden airlines to repair their balance sheets.

Carriers, however, say an unquenched thirst for travel, hybrid work arrangements and limited airline capacity would keep their business humming.

American said demand for domestic and short-haul international travel is “very strong”, and lifting of travel restrictions and testing requirements around the globe are expected to further drive up long-haul international traffic.

It said debt reduction remained a “top priority”, adding the company is on track to reduce total debt levels by US$15 billion by the end of 2025.

Adjusted profit for the third quarter came in at 69 cents per share, topping analysts’ expectations of 56 cents a share. Revenue for the quarter jumped 13 per cent increase versus 2019 to US$13.5 billion. REUTERS