- American Airlines reports smaller-than-expected adjusted loss
- Capacity cuts restore pricing power, aiding co's profit forecast
- Premium services outperform main cabin, boosting revenue
Oct 23 (Reuters) - American Airlines raised its 2025 profit forecast on Thursday, signaling that industry-wide capacity cuts following a demand slump earlier this year had begun to yield pricing gains, sending its shares up 4% in morning trading.
A slowdown in domestic travel earlier this year, driven by economic uncertainty stemming from President Donald Trump's sweeping tariffs, had left airlines in a bind, and pushed them to cut fares to fill seats.
Since then, major carriers have scaled back capacity to restore pricing power and safeguard margins.
Many carriers are seeing stronger domestic demand, while premium, high-margin offerings continue to demonstrate resilience.
The Fort Worth, Texas-based carrier said unit revenue, a key gauge of its ability to charge more for seats on offer, improved sequentially through the quarter, with September marking a return to positive growth.
By the year end, the carrier expects to fully restore its share of indirect revenue, which had been affected by a previous sales strategy misstep that prioritized renegotiating contracts with corporate travel agencies and clients, while reducing perks and discounts.
On Thursday, the carrier also named Nathaniel Pieper, CEO of oneworld alliance, a global alliance of some major international airlines, as its chief commercial officer, effective November 3.
American Airlines now expects full-year adjusted profit per share in the range of 65 cents to 95 cents, a sharp turnaround from its July forecast of a 20-cent loss to an 80-cent profit.
For the quarter through September, the U.S. carrier reported a smaller-than-expected adjusted loss of 17 cents per share. Analysts were expecting a 28 cents loss, according to data compiled by LSEG.
On Wednesday, domestic peer Southwest reported a surprise profit, helped by an improvement in travel bookings.
American's total operating revenue marginally rose to about $13.69 billion, beating expectations of $13.63 billion.
PREMIUM SERVICES RULES
High-margin luxury services, meanwhile, have remained strong, as affluent travelers continue to pay extra for a more comfortable journey. Airlines have been firming up their bets on premium services since the pandemic.
"Premium unit revenue growth year over year continues to outperform the main cabin," American said on Thursday.
The carrier also outlined its plans to strengthen its up-market offerings as it works to close the margin gap with rivals United Airlines and Delta Air Lines.
It aims to expand premium seating at nearly twice the pace of main cabin seats and will invest in airport infrastructure, including new lounges and other facilities.
"We are encouraged by American's results and view it as another indication of the importance of premium cabin and loyalty revenues," TD Cowen's Tom Fitzgerald wrote in a note.
Reporting by Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli
Source: Reuters