American Airlines Raises Profit Forecast

(Reuters) – American Airlines lifted its annual profit forecast on Thursday, citing resilient travel demand and improved pricing power as airlines trim capacity, resulting in a 3% surge in shares before the market opened.

During the U.S. summer travel season, excess supply of airline seats had forced companies to offer discounts to fill planes, negatively impacting earnings. However, U.S. airlines have since moderated capacity, with domestic seat growth decreasing to 1.5% in October and November from 5.5% in July, according to Bank of America analysts.

The company now anticipates adjusted earnings per share (EPS) in the range of $1.35 to $1.60, up from a prior forecast of $0.70 to $1.30.

American Airlines is also recovering from a previous issue with its sales and distribution strategy that involved reworking contracts with corporate travel agencies and clients, resulting in lost perks and discounts.

This approach backfired, leading to many corporate travelers leaving, which dented revenue and damaged the airline's reputation while giving competitors an advantage.

To regain those corporate clients, American Airlines has implemented several measures. In July, the airline announced it was renegotiating contracts with travel agencies and corporate customers.

For the quarter, the Texas-based carrier reported a net loss of $149 million, or 23 cents per share, compared to a net loss of $545 million, or 83 cents per share, a year ago. Meanwhile, total operating revenue rose by 1.2% to $13.65 billion.