American Airlines Group (AAL) joined carriers Delta Air Lines (DAL) and Southwest (LUV) in slashing guidance today amid fears about the U.S. economy and a weakening demand outlook. The airline group cited safety issues and weaker leisure demand as it said revenues in the current Fiscal 2025 first quarter would be flat on last year, versus previous guidance for growth of between 3% and 5%.
Fatal Crash Hurts AAL Demand
It comes after the fatal mid-air collision between one of its planes and a U.S. Army helicopter over the Potomac River in January. The crash left no survivors and has affected how passengers view the airline, with the company saying in a regulatory filing today that “the revenue environment has been weaker than initially expected due to the impact of Flight 5342,” while it also blamed “softness in the domestic leisure segment.”
As a result of these softer demand trends, AAL expects to report a wider first-quarter adjusted loss per share of $0.60 to $0.80. In January it had forecast a loss of between $0.20 and $0.40 per share.
U.S. Airlines Feel the Heat
Fears about a softer economic outlook also moved DAL and LUV to slash guidance for the current quarter, prompting concerns about the industry’s capacity to weather another storm as it tries to secure its recovery from the pandemic. The warnings comes as airline industry executives gather for a JPMorgan conference where they will be discussing everything from demand trends to aircraft delivery delays.
Delta Air Lines slashed its profits outlook, citing the “recent reduction in consumer and corporate confidence caused by increased macro uncertainty, driving softness in domestic demand.” DAL cut its Fiscal first-quarter earnings forecast to between $0.30 and $0.50 per share from previous guidance of $0.70 to $1, and said revenue growth would not exceed 5% against a prior estimate of 6-8% growth.
Southwest Airlines also cut forecasts today, advising investors it expects unit revenue growth to be between 2% and 4% in the first quarter Fiscal 2025, compared with its prior range of 5% to 7% increase.
Southwest blamed it on less government travel, and a greater impact from the California wildfires than it had originally estimated. “The remainder of the decrease is primarily attributable to softness in bookings and demand trends as the macro environment has weakened,” the company said in its 8-K regulatory filing.
It comes after stocks came under broad pressure yesterday on worries about the health of the U.S. economy.
Shares of DAL, AAL and United Airlines (UAL) fell early on Tuesday, while LUV rallied on plans to charge passengers for checked bags.
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