American Air Yanks Full Year Guidance As Trade Wars Hinder Travel Demand Prediction 

American Airlines posted a mixed first-quarter report, highlighted by an earnings beat, continued debt reduction, and firm performance in its loyalty program and international markets. However, mounting economic uncertainty and softening passenger demand—compounded by the ongoing trade war—prompted the airline to withdraw its full-year guidance. 

“The actions American has taken over the past several years to refresh our fleet, manage costs and strengthen our balance sheet position us well for the uncertainty our industry is facing,” AA CEO Robert Isom stated in a press release. 

Isom pointed out, ”The resiliency of the American Airlines team, combined with the investments we have made to differentiate our network, product and customer experience, give us extreme confidence in our ability to navigate the current environment and deliver strong results for the long term.”

Here’s the breakdown of 1Q25 earnings:

Headline Takeaways:

• Revenue and Earnings Beat Estimates: Operating revenue of $12.55B slightly beat Bloomberg Consensus estimates ($12.53B), and the adjusted loss per share (59c) was narrower than forecasted (69c).

• Improving Bottom Line: While the adjusted net loss of $386M is up 71% YoY, it’s still significantly better than the consensus estimate of a $468.8M loss.

Operational Weakness: 

• Decline in Passenger Metrics

• Passenger Revenue: Down .6% YoY to $11.39B, slightly beating the $11.36B estimate.

• Available Seat Miles (ASM) and Revenue Passenger Miles (RPM) declined YoY, showing reduced capacity and demand.

• Load Factor (80.6%) fell short of expectations (81.9%) and last year’s level (81.5%), indicating weaker aircraft utilization.

Cost Pressures:

• Cost per Available Seat Mile (CASM) rose 2.9% YoY to 18.34c, outpacing revenue growth and squeezing margins.

• Passenger Yield rose 1.4% YoY, which may help offset some of the cost pressure, but is not keeping pace with inflation or cost increases.

Fleet Growth:

• Aircraft Count increased 2.3% YoY to 1,552, signaling long-term confidence despite short-term weakness.

Overall Takeaway:

• Positives: Narrower-than-expected losses, slight revenue beat, and modest improvement in yields.

• Negatives: Declining traffic and capacity metrics, rising costs, and weaker operational efficiency.

Structural challenges, including demand and cost inflation, linger for the airline heading into the second half of the year… 

Perhaps that’s why management pulled its full-year earnings guidance: 

Based on present demand trends, the current fuel price forecast and excluding the impact of special items, the company expects its second-quarter 2025 adjusted earnings per diluted share4 to be between $0.50 and $1.00. The company is withdrawing its full-year guidance at this time. American intends to provide a full-year update as the economic outlook becomes clearer.

UBS analysts offered clients their first take on the earnings: 

American Airlines Withdraws Guidance For This Year American Airlines withdrew its profit forecast for 2025 on Thursday, citing concerns over discretionary budget amid tariff pressures and government spending uncertainties. They said this makes it difficult for them to predict travel demand.

According to the Transportation Security Administration’s Checkpoint throughput data on passengers at U.S. airports, travel demand remains robust in the spring and is expected to increase based on seasonal trends. Any sharp slowdown in the checkpoint data in the coming months will likely be attributed the trade war. 

Shares of American Airlines are muted in premarket trading in New York following the earnings release. The uncertainty about the economy’s reaction to tariffs will likely spark turbulence in the industry.