American Air sees return to profit on summer travel demand

American Airlines Group Inc. expects a return to profit heading into the busy summer travel season after bad weather and delays linked to air traffic congestion weighed on the carrier’s early-year results. 

Adjusted earnings will be $1.15 to $1.45 a share in the second quarter, American said in a statement Thursday as it reported a loss for the first three months. The midpoint is above the $1.16 average of analyst estimates compiled by Bloomberg.

The outlook is an early sign that American’s post-pandemic shift in strategy to focus on domestic and near-international routes may pay off. The carrier believes its Sun Belt hubs in the US will benefit from a shift in population to states like Texas and Florida and its regional aircraft network can serve a broader base of smaller cities with little airline presence. 

American shares rose 5.6% as of 8:12 a.m. before the start of regular trading in New York. The stock increased 1.3% this year through Wednesday. 

Capacity this quarter will climb as much as 9% from 2023, fueled by another summer of strong leisure demand and growing corporate and small business travel. Analyst were expecting 7.6% growth on average. Non-fuel unit costs will rise as much as 3%.

The airline reiterated its full-year profit forecast of $2.25 to $3.25 a share.

The carrier has largely sidestepped fallout from the crisis engulfing Boeing Co., which has slowed deliveries amid manufacturing issues and has struggled to get certification for overdue models. While American has purchased the delayed 737 Max 10, those aren’t scheduled to start arriving until 2028. Chief Executive Officer Robert Isom has encouraged the planemaker to “get its act together.”

Manufacturing delays at Boeing will reduce to 16 the number of 737 Max aircraft American receives this year, down from 20 previously, and 787 deliveries will slide to three from six.

‘Weather Events’

American’s first-quarter adjusted loss of 34 cents a share compared with a 29-cent deficit expected by analysts. Revenue was $12.6 billion. The results for the period were affected by “significant weather events across its network,” American said.

The Fort Worth, Texas-based carrier in February increased the cost to check bags. Global airlines collected $33.3 billion in such fees in 2023, up 15% from a year earlier.  

American has delayed until July a change under which most customers will earn AAdvantage miles and loyalty points if they book flights directly with the carrier or certain partner airlines or preferred travel agencies. The shift was to have occurred May 1. It’s part of a broader effort by the airline to push customers and companies to deal directly with American instead of going through online agencies or corporate travel managers.