American Airlines Group Inc. (NASDAQ: AAL) and Spirit Airlines, Inc. (NYSE: SAVE) saw a notable decline in their share prices on Wednesday following a significant downward revision of their third-quarter earnings forecasts. The move comes as the airline industry grapples with soaring fuel costs.
American Airlines (NASDAQ: AAL) has decreased its Q3 earnings per share (EPS) projection to $0.20 to $0.30 from the previous estimate of $0.85 to $0.95. The airline cited a substantial surge in fuel prices since its initial guidance in July, with anticipated average fuel costs now at $2.90 to $3.00 per gallon, up from $2.55 to $2.65 per gallon. In addition, the carrier disclosed that a new labor agreement with its pilots would negatively impact its operating margin by about 1.7% and reduce EPS by $0.23.
American Airlines stock plunged 5.67% to $13.31 following the release of this bleak outlook.
Meanwhile, Spirit Airlines has revised its Q3 outlook due to increased promotional activity and steep discounts for travel booked in the second half of the third quarter through the pre-Thanksgiving period. The airline now predicts third-quarter revenue to be between $1.25 billion and $1.26 billion, lower than the previous estimate of $1.30 billion to $1.32 billion. The operating margin is also expected to drop from 14.5% to 15.5%, a significant difference from the earlier prediction of a decline of 5.5% to 7.5%.
Spirit Airlines shares tumbled 6.25% in response to the news.
These revelations are part of a broader industry trend, as other key players in the airline sector, including Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV), have recently slashed their third-quarter earnings estimates in the face of rising costs.
Zabih Ullah is a seasoned finance writer with more than ten years of experience. He is highly skilled at analyzing market trends, decoding economic data, and providing insightful commentary on various financial topics. Driven by his curiosity, Zabih stays updated with the latest developments in the finance industry, ensuring that his readers receive timely and relevant news and analysis.
