American Airlines, Spirit cut summer profit forecast on costs

American Airlines, Spirit cut summer profit forecast on costs

An American Airlines plane sits at the gate at Ronald Reagan Washington National Airport (DCA) in Arlington, Virginia on february 23, 2023

Daniel Slim | Afp | Getty Images

American Airlines and Spirit Airlines on Wednesday joined other carriers in warning that higher costs will hit profits during the bustling summer quarter.

American said it expects adjusted earnings per share to come in between 20 cents and 30 cents in the third quarter, down from a previous forecast of as much as 95 cents a share, citing more expensive fuel and a new pilot labor deal. The carrier halved its operating margin from a forecast earlier this summer to 4% to 5%.

Spirit Airlines expects negative margins of as much as 15.5% in the three months ending Sept. 30, down from an earlier estimate of -5.5% to -7.5%. The budget airline also cut its revenue forecast for the third quarter.

Airlines have lost the pricing power they commanded last summer when capacity was more constrained coming out of the pandemic, even though demand has been strong.

Fare-tracking company Hopper on Tuesday said it expects fares to continue dropping in the fall shoulder season, with domestic U.S. tickets averaging $211 in September and October, down 30% from the peak of summer.

Shares of American and Spirit were down in premarket trading on Wednesday. Southwest Airlines and Alaska Airlines cut their third-quarter forecasts earlier this month.

Airlines start reporting third-quarter results in mid-October.

Original news source Credit: www.cnbc.com

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