American Airlines posted a $545 million loss for the third quarter as revenue remained flat compared to last summer and costs increased, especially due to a new contract with its pilots. The airline lowered its forecast for full-year earnings to between $2.25 and $2.50 per share, down from the previous forecast of $3 to $3.75 per share.
This is in contrast to American’s two closest rivals, United Airlines and Delta Air Lines, who both reported rising revenue and a profit of $1.1 billion for the quarter, which covers the peak vacation-travel season. The travel industry has seen a boom in demand as people begin to travel again after the pandemic. However, American’s revenue remained flat compared to the previous year. As a result, the airline is reevaluating its development of new routes, prioritizing profitable routes to optimize financial performance.
American’s third-quarter loss of $545 million is a significant drop from the profit of $483 million in the same quarter last year. The airline attributes the loss to $983 million in charges for contract-ratification bonuses paid to pilots in August. The company’s earnings, excluding special items, were 38 cents per share, exceeding analysts’ expectations of 25 cents per share. However, its revenue of $13.48 billion fell slightly below Wall Street forecasts but was on par with last summer’s figures, whereas United and Delta reported revenue gains of 12% and 11% respectively.
Labor costs at American increased by 17%, which accounts for nearly $600 million, although this increase was partially offset by lower fuel prices compared to the previous year. Rising fuel prices coupled with slowing travel pose concerns for airlines and could lead to higher costs across the industry. United, for example, gave a weaker end-of-year forecast due to rising fuel prices and the suspension of flights to Tel Aviv because of the Israel-Hamas conflict.
American Airlines took on new debt during the pandemic but managed to pay down $1.4 billion in debt during the quarter. Despite the loss, shares of American rose by 2.6% in midday trading.