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American Airlines has significantly lowered its full-year outlook for 2025, forecasting **adjusted earnings per share (EPS) between a $0.20 loss and $0.80 gain. This revised guidance falls well short of its earlier projection of $1.70–$2.70 EPS, underscoring the rising headwinds faced by the carrier.
📉 Why the Downgrade?
- Domestic leisure demand remains weak—particularly since February—as inflation and tariff-driven consumer caution suppress discretionary travel spending.
- Labor costs continue to climb: Labor agreements ratified in 2024 boosted wages, driving non-fuel unit costs higher. CFO Devon May warned that non-fuel unit costs would rise in the mid-single-digit range YoY.
- Revenue mix challenges: A higher share of regional jet flying and reduced capacity (particularly for domestic routes) further pressured unit revenue.
📊 Q2 Performance & Revised Forecast
- In Q2 2025, American reported a net profit of $599 million on a record $14.39 billion in operating revenue, with adjusted EPS of $0.95, beating estimates. However, shares fell nearly 10% intraday following the announcement.
- The airline now expects a Q3 adjusted EPS loss between $0.10 and $0.60, depending on demand and operational factors.
💰 Balance Sheet & Cash Generation
- In the first half of 2025, $3.4 billion in operating cash flow generated $2.5 billion in free cash flow. The airline reduced net debt to approximately $29 billion, ending Q2 with $12 billion in liquidity.
- Fleet modernization and cost discipline remain central to longer-term strategy as the airline navigates rising operational costs.
⚠️ Strategic & Operational Challenges
- American continues to work through the fallout from its failed 2023 travel agency strategy, which alienated corporate clients and dented business travel revenue. Efforts to reacquire lost market share remain ongoing but slow.
- Competing airlines like Delta and United have either maintained or restored guidance with far narrower ranges, highlighting American’s relatively conservative positioning.
