American Airlines (AAL) shares rose on Thursday after the largest U.S. carrier increased its forecast for fourth-quarter profits. The boost in profit outlook is attributed to the ongoing high demand for domestic travel and a successful holiday season during which American Airlines took advantage of the difficulties faced by its competitor, Southwest Airlines (LUV).
American Airlines announced that it expects its adjusted profits for the fourth quarter to be in the range of $1.12 and $1.17 per share, nearly double its previous prediction of 50 cents to 70 cents per share. Additionally, the company expects its profit margins to be between 10.25% and 10.5%
Furthermore, the company expects its revenues to be significantly higher than initial projections, increasing by 16% to 17% from the previous year, due to the increased demand for domestic travel. American Airlines will release its official fourth-quarter earnings report on January 26th before the market opens, with a conference call scheduled for the following day at 8:30 am EST.
The reasons for increasing airline industry stock prices
The airline reported that it operated 66 million total available seat miles in the fourth quarter, which is 6.1% less than the levels in 2019. This reflects the ongoing challenges that airlines face in terms of utilizing capacity due to the difficulties in hiring pilots and cabin crew in a tight labor market. American Airlines’ shares increased by 5.7% in midday trading after the profit update and were being traded at $16.22 each.
Delta Air Lines’ update of its profit forecast for next year is a positive sign for the airline industry as a whole. The company’s expectations of nearly doubling its profit forecast for 2022, from $5 to $6 per share, is a reflection of the sustained recovery in travel demand, which has been recovering since the pandemic’s peak.
The decline in jet fuel prices and the reduction of non-fuel operating costs also contribute to the company’s upbeat outlook. It’s also worth noting that the company’s revenue forecast of 15-20% growth from 2019 levels is a positive indication of the company’s ability to capitalize on the rebound in travel demand.
Delta Air Lines’ fourth-quarter earnings report on Friday will be closely watched by investors as it will give more insights into the company’s performance and its prospects. It will also indicate the current state of the travel industry and how it is recovering from the impact of the pandemic.
Additionally, a comparison of the performance of American Airlines and Delta Air Lines can provide a perspective on how well the two major airlines are doing, and how they are positioning themselves to capitalize on the rebound in travel demand.
According to Delta, the positive trends seen in the latter part of this year should help revenues for 2022 reach between $45.5 billion and $45.6 billion, with adjusted earnings per share of $3.07 and $3.12. The company’s shares were trading at $38.95 each, up 2% in early Thursday trading.