American Airlines raises Q2 profit guidance on summer travel demand

Shares of American Airlines trend higher after the airline raises its forecast due to strong travel demand.

Video transcript

- Everyone, switching gears here. American Airlines showing some strength today, the company raising its expectations for adjusted earnings per share for the quarter to $1.45 to $1.65. That's the range. That is up from the previous range of $1.20 to $1.40. They're saying that this is going to be the busiest summer for air travel since-- checks watch-- prepandemic.

American's stock popping on this news. It's up by about 1.7% here as we're keeping a close tab on shares of AAL. Also perhaps worth keeping tabs on some of the other airlines that could be moving in concert. I'm thinking about DAL as well on the day as they've already signaled where that strong demand is. We've heard that from Ed Bastian who talked about this in their most recent earnings as well.

And a lot of the theme that you're sensing from many of the travel names, whether it's our conversations with Delta CEO Ed Bastian or whether it's with United Airlines CEO and even Airbnb CEO, Brian Chesky, it's that the travel and services within the experience economy are still continuing to do strong as consumers are prioritizing that purchase here as much of that pent-up demand continues to permeate, even into years after when it was set to come back and forth for us as people were just looking to get out of the house.

We're now multiple years removed from that, and people are still spending on those experiences.

- Yes, they are. Let's put some numbers around this. If you look at the TSA numbers over the Memorial Day weekend-- the four days of Memorial Day weekend-- 9.8 million passengers, almost, through those airport screening checkpoints. That is 300,000 higher, not only than last year, not only in the year before that, not only than during the pandemic, than 2019. 300,000 more than 2019.

So obviously, you're seeing this uptick since then. So there's the demand. That's just to put a little color around that. Then you have the fuel part of this, which is important for American Airlines. The company now says in the second quarter-- in its fiscal second quarter-- it's going to pay in a range $0.10 less per gallon for its average fuel.

So fuel prices are going down. Demand is robust. That's a good equation for them.

- Yeah, it's a trend that's locked in right now. Q1, you actually saw-- that was the first quarter, first full quarter since prepandemic that we had actually beat those prepandemic numbers for the entirety and actually came in at 102% of a prepandemic marker there. And so that-- considerable in the first quarter, and seeing that over the entirety of that three-month stretch.

And so it seems with that trend locked in, American Airlines, United Airlines, even Delta as well, a lot of the airlines right now are signaling that this is something that they can continue to ride the tailwinds of, if you will. I know I was in those numbers as well over the weekend.