American Airlines has lowered its profit guidance to adjust for new labour contract and higher fuel prices.
American now expects to pay an average of between $2.90 and $3.00 per gallon of jet fuel in the third quarter. As a result of its continued strong operating performance, the airline said that it now expects its third-quarter capacity to be at the high end of its initial guidance, or up approximately 6% to 7% versus the same period in 2022. Total revenue for the third quarter is expected to be approximately flat to prior expectations, with the mid-point of year-over-year TRASM approximately 0.5 points lower compared to previous guidance. Third-quarter CASM-ex fuel is now expected to be at the better end of previous guidance.
American now expects its third-quarter adjusted operating margin to be approximately 4.0% to 5.0% and adjusted earnings per diluted share to be between approximately $0.20 and $0.30.
The airline said that the ratification of a new collective bargaining agreement by the mainline pilots represented by the Allied Pilots Association resulted in retroactive pay expense of approximately $230 million to be recognized in the third quarter. This expense is expected to impact third-quarter adjusted operating margin by approximately 1.7 points and adjusted earnings per diluted share by $0.23. The remainder of the adjustment to the company’s updated outlook is driven by higher fuel prices in the quarter.