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On Thursday, American Airlines (AAL, $13.46) forecast that fourth-quarter profit would exceed analyst estimates after posting better-than-expected earnings in the third quarter, as demand for travel remained resilient despite higher airfare and growing risks of an economic recession. American Airlines expects demand to increase as Covid travel restrictions and testing requirements continue to be lifted worldwide.
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Adjusted profit for the third quarter came in at 69 cents per share, topping analysts expectations of 56 cents a share. Revenue for the quarter jumped by a 13% increase versus 2019 to $13.5 billion. The Texas-based carrier expects adjusted profit between 50 and 70 cents per share for the fourth quarter, compared with analysts' estimate of 22 cents per share, according to Refinitiv IBES data.
Why it matters
The airline industry, which is facing higher fuel and wage bills, has been relying on strong demand to mitigate inflationary pressure with higher fares. Investors are concerned that a slowdown in consumer spending would hurt profits and make it harder for debt-laden airlines to repair their balance sheets. Carriers, however, say an unquenched thirst for travel, hybrid work arrangements, and limited airline capacity would keep their business humming.
