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 announced on Wednesday that higher costs will impact their profitability during the busy summer quarter.
American Airlines stated that it expects adjusted earnings per share to be between 20 cents and 30 cents in the third quarter, which is lower than its previous estimate of up to 95 cents per share. The decrease is attributed to the increased cost of fuel and a new pilot labor agreement. The airline also revised its operating margin forecast for the summer to range from 4% to 5%.
Spirit Airlines now predicts negative margins of up to 15.5% for the three months ending on September 30, down from its previous estimate of -5.5% to -7.5%. The budget airline also adjusted its revenue forecast for the third quarter.
Despite strong demand, airlines have lost their pricing power compared to last summer when capacity was more limited following the pandemic.
Fare-tracking company Hopper anticipates a further decline in fares during the fall shoulder season, with the average price of domestic U.S. tickets in September and October projected to be $211, a 30% decrease from the peak of summer.
Shares of American and Spirit were down in premarket trading on Wednesday. Southwest Airlines and Alaska Airlines had previously reduced their third-quarter forecasts earlier this month.
Mid-October marks the beginning of the reporting of third-quarter results for airlines.
