By Shivansh Tiwary
(Reuters) -American Airlines forecast 2025 profit below Wall Street expectations as the carrier braces for higher costs stemming from expensive labor contracts signed last year, sending its shares down 8% on Thursday.
The airline also forecast a bigger first-quarter loss than analysts expected, breaking away from the bumper predictions of rivals such as Delta Air Lines (NYSE:DAL) and United Airlines that are benefiting from improved pricing and strong winter demand.
“We expect non-fuel unit costs to be up mid-single digits year over year with a large majority of the cost growth coming from higher salaries and benefits,” CFO Devon May said during its earnings call.
The company in September ratified a new five-year deal with 28,000 of its flight attendants, offering wage increases of up to 20.5% along with retroactive pay. It also signed a two-year contract extension in October with a worker group including aircraft maintenance technicians, cleaners and planners.
American spent much of 2024 mending relationships with corporate travelers after a botched sales strategy aimed at cutting back on perks and discounts dented the airline’s revenue, hurt its image and gave rivals an edge.
Shares of Delta jumped nearly 50% last year while United surged 138%, far above American’s gains of about 30%.
The legacy carrier expects 2025 adjusted earnings per share of $1.70 to $2.70, compared with analysts’ average estimates of $2.42, according to data compiled by LSEG.
Jet fuel prices have also climbed sharply in the past month, tracking a rise in global crude benchmarks driven by broader sanctions targeting Russian oil revenue, alongside growing optimism about stronger demand from China.
The company expects current-quarter adjusted loss per share of 20 cents to 40 cents, compared with estimates for a loss of 4 cents.
“As such, 2025 EPS guidance with a $2.20 mid-point looks conservative, considering that the carrier just resoundingly beat its own 4Q EPS guide,” Citi analyst Stephen Trent (NSE:TREN) wrote in a note.
The Texas-based carrier reported an adjusted profit of 86 cents per share, beating expectations of 64 cents, due to improved pricing.
Total (EPA:TTEF) operating revenue rose 4.6% to about $13.66 billion, above estimates of $13.39 billion.
