| American Airlines' Profit Warning Sends Carrier Shares Lower|
DOW JONES & COMPANY, INC. 12:19 PM ET 1/10/2019
Symbol Last Price Change
|AAL ||31.3751 ||-2.0449 (-6.12%)|
|DAL ||47.78 ||-0.69 (-1.42%)|
|LUV ||48.35 ||-0.73 (-1.49%)|
|QUOTES AS OF 12:22:50 PM ET 01/10/2019 |
American Airlines Group Inc. (AAL) trimmed its profit guidance for 2018, raising concerns that U.S. carriers are falling short of revenue expectations and sending shares down across the sector.
American said Thursday that revenue didn't rise as much as expected at the end of the year. Delta Air Lines Inc.(DAL) last week also trimmed its fourth-quarter revenue outlook, as a result of slower sales of more expensive tickets in December.
Some investors and analysts expect other airlines will report similarly lackluster revenues and stop raising airfares, potentially denting their profitability. Shares in American fell nearly 7.75% on Thursday, while Delta's shares fell more than 2.3%. Shares in United Continental Holdings Group Inc. shares fell 5.3%, and shares in Southwest Airlines Co.(LUV) were down about 2.5%.
Most of those carriers will report their fourth-quarter earnings later this month. American, the world's largest airline by traffic, said it now expects adjusted earnings of $4.40 to $4.60 a share for 2018, down from an October forecast of $4.50 to $5 a share and below the $4.62 a share that analysts polled by FactSet had expected.
American also cut its expectations for unit revenue, a measure of income per seat flown a mile. American predicted its fourth quarter unit revenue rose 1.5% from a year ago, after previously projecting it could climb as much as 3.5%.
Those revisions could threaten a record stretch of profitability for U.S. carriers.. While a drop in fuel prices since October could boost airlines' bottom lines, it could also hurt their ability to raise fares, analysts say, particularly if the economy slows and demand for air travel ebbs.
Not all carriers struggled to meet revenue targets at the end of the year. Allegiant Travel Co. said its Allegiant Air unit, a leisure-focused budget carrier, said Wednesday that its unit revenue climbed between 3.7% and 4.1% in the fourth quarter.
American's shares are down 43% in the past year as the airline has been weighed down by a heavy debt load, some operational stumbles and stiff competition from United's wider network of routes.
"The company cannot continue to come out with a bullish message and then underperform all year," Cowen & Co. analyst Helane Becker wrote in a research note. "We can't help but be disappointed."
--Colin Kellaher contributed to this article.
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