American Airlines restores 2025 forecast, flags economic worries for keeping it broad

An American Airlines passenger jet takes off from Miami International Airport in Miami on June 3, 2016. (AP Photo/Alan Diaz)

American Airlines restored its financial forecast for 2025 on Thursday and cited economic uncertainty for keeping its expectations broad - from a potential loss to a profit.

The carrier’s shares fell nearly six per cent before the market open as the forecast underscored the challenges airlines are facing in the domestic market, where travel spending remains tepid amid sweeping U.S. tariffs and budget cuts.

American generates more than two-thirds of its passenger revenue from the domestic market and expects a per-share loss of 20 cents to a profit of 80 cents in 2025.

“The company believes the top end of the range is achievable if demand in the domestic market continues to strengthen and only expects to be at the bottom end of the range if there were to be macro weaknesses that are not seen today,” the carrier said.

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Most U.S. airlines withdrew their financial forecasts in April. While some have reinstated their expectations, they remain cautious about how the economy will fare in an ever-evolving tariff landscape.

Demand in the domestic travel market has remained subdued with budget travelers approaching their plans with caution. American, which had enhanced its focus on the U.S. domestic market, sees itself more exposed to the trend.

Soft demand has also hurt earnings of Southwest Airlines, the largest U.S. domestic airline, as summer, typically the peak money-making season for airlines, is falling short this year, with unsold standard economy seats forcing carriers to cut fares.

Domestic market was the weakest in the second quarter, with American’s unit revenue, a proxy for pricing power, declining 6.4 per cent from a year ago.

Meanwhile, its unit revenue in international markets was up, led by a five per cent annual jump in the transatlantic market.

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For the third quarter, American expects adjusted loss per share in the range of 10 cents to 60 cents, compared with analysts’ estimates of 7 cents, according to data compiled by LSEG.

The U.S. carrier reported a net income of US$599 million, or 91 cents per share for quarter ended June 30, compared with US$717 million, or US$1.01 per share, a year earlier.

Its total operating revenue marginally rose to about US$14.4 billion.

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Reporting by Shivansh Tiwary in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koyyur