American Airlines and Spirit Airlines revise summer profit forecast due to escalating costs

American Airlines and Spirit Airlines on Wednesday joined other carriers in cautioning about potential profit challenges during the busy summer quarter.

American Airlines has revised its third-quarter adjusted earnings per share outlook to a range of 20 cents to 30 cents, down from the previous forecast of up to 95 cents per share. This revision can be attributed to increased fuel costs and a new pilot labor agreement. The airline has also reduced its operating margin forecast to 4% to 5%.

Spirit Airlines now anticipates negative margins of up to 15.5% for the three months ending September 30, compared to the earlier estimate of -5.5% to -7.5%. Additionally, the budget carrier has revised its revenue forecast for the third quarter.

Airlines are facing a different pricing landscape compared to last summer, when capacity was constrained due to the Covid pandemic. Despite strong demand, they are now experiencing a traditionally slower travel period. Frontier Airlines has also warned about lower sales in recent weeks and projects an adjusted loss for the quarter.

Shares of American Airlines, Spirit Airlines, and Frontier Airlines declined on Wednesday, with Frontier’s stock hitting a new 52-week low.

Hopper, a fare-tracking company, predicts further decline in fares during the fall shoulder season. Domestic U.S. tickets are expected to average $211 in September and October, which is a 30% decrease from the summer peak.

Southwest Airlines and Alaska Airlines previously downwardly adjusted their third-quarter forecasts.

The airline industry will start reporting third-quarter results in mid-October.