TLDR
- American Airlines beat Q2 earnings expectations with 95 cents per share vs 77 cents expected, but stock fell nearly 10%
- Company issued disappointing Q3 forecast of $0.10-$0.60 loss per share, missing analyst expectations of $0.03 profit
- Full-year guidance lowered to between $0.20 loss and $0.80 profit, down from January’s $1.70-$2.70 estimate
- CFO declared “the worst is over” and expects sequential monthly revenue improvements through Q3
- Domestic travel demand remains weak with passenger revenue per available seat mile down over 6% in Q2
American Airlines delivered mixed results Thursday that left investors scratching their heads. The carrier beat second-quarter earnings estimates but sent shares tumbling with a cautious outlook for the months ahead.
The airline reported adjusted earnings of 95 cents per share, crushing Wall Street’s 77-cent estimate. Revenue came in at $14.39 billion, slightly above the $14.3 billion analysts expected.
But the good news ended there. American’s third-quarter forecast spooked investors who were hoping for better times ahead.
The company expects an adjusted loss of 10 cents to 60 cents per share for Q3. Analysts had been looking for a modest 7-cent loss, making American’s projection a clear disappointment.
CEO Robert Isom blamed the weak forecast on several factors hitting the airline at once. Consumer weakness has hurt domestic travel demand, while corporate travel remains flat heading into summer.
“July’s been a tough month because of the domestic consumer weakness,” Isom told CNBC’s Squawk Box. Weather disruptions from storms haven’t helped either, creating operational headaches across the network.
Domestic Struggles Continue
The numbers tell the story of American’s domestic challenges. Passenger revenue per available domestic seat mile dropped more than 6% in the second quarter.
That’s a key metric showing how much pricing power the airline has lost on home turf. International routes painted a different picture, with the same measure up nearly 3% as travelers continued flocking to destinations like Japan and Italy.
American’s passenger load factor fell 1.9 percentage points to 84.7%. That means fewer seats were filled despite the airline adding capacity.
Passenger yield also declined 1.5% to 19.96 cents. The airline was essentially carrying more passengers but making less money per mile flown.
CFO Strikes Optimistic Tone
Despite the gloomy forecast, CFO Devon May tried to reassure investors during the earnings call. She declared that “the worst is over” and expects revenue to show sequential monthly improvements throughout the current quarter.
The airline plans to take delivery of 50 new aircraft this year. Capacity will grow 5% during peak July travel but slow to 2% growth in August and shrink 1% in September.
American generated $3.42 billion in operating cash flow through the first half of 2025. Free cash flow reached $2.48 billion, helping push total available liquidity to $12 billion at quarter’s end.
The airline’s balance sheet shows $38 billion in total debt with net debt of $29 billion. Management highlighted its modernized fleet and strengthened financial position as advantages during volatile times.
International markets provided some bright spots for American. Atlantic passenger unit revenue climbed 5% year-over-year, while co-branded credit card spending rose 6%.
The AAdvantage loyalty program added 7% more members during the quarter. American recently rolled out new features letting customers use miles for upgrades and expanded premium offerings like its Flagship Suite experience.
For the full year, American now projects adjusted earnings between a 20-cent loss and 80-cent profit. The midpoint sits at 30 cents per share, far below the $1.70 to $2.70 range the company outlined in January.
Management says the upper end of guidance depends on domestic demand strengthening. The lower end would only happen if unexpected economic weakness emerges, according to company statements.
American ended Q2 with 1,539 aircraft in its fleet and 138,100 full-time employees. Weather events disrupted operations during the quarter, with such incidents up 36% compared to the previous year.
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