American Airlines (NASDAQ:AAL) shares tumbled 8.55% premarket Thursday after the company announced a cut to its full-year earnings guidance, overshadowing a slight beat in second-quarter earnings.
The airline reported adjusted earnings of $1.09 per share, marginally higher than the analysts' estimate of $1.07. However, revenue for the quarter was slightly below expectations at $14.3 billion, compared to the consensus estimate of $14.39 billion.
American Airlines' second-quarter revenue marked a 2% increase from the same period last year, setting a record high for the company. Despite this, the airline's revised full-year earnings guidance ranges from $0.70 to $1.30 per share, significantly below the analysts' consensus of $1.81 and well below the previous guidance range of $2.25 to $3.25.
The midpoint of the guidance, $1.00, is also well below the consensus, indicating a more cautious outlook from the company. AAL expects its third-quarter 2024 adjusted earnings per diluted share to be approximately breakeven, reflecting the ongoing impacts of its previous sales strategy.
CEO Robert Isom acknowledged the challenges faced in the second quarter, attributing them to the company's previous sales and distribution strategy and an imbalance of domestic supply and demand.
Isom stated, "We are taking this challenge head-on, with clear and decisive actions to deliver on a strategy that maximizes our revenue and profitability." He emphasized the company's commitment to operational reliability and cost management as key to unlocking significant value.
The airline has taken steps to improve its sales and distribution, including restoring competitive fares and expanding benefits in its AAdvantage Business program. Additionally, American Airlines has focused on strengthening relationships with corporate customers and travel agencies.
In terms of operational performance, American Airlines reported strong results, including a robust Fourth of July operation and a quick recovery from a technology outage on July 19.
The company also made progress in reducing its total debt by approximately $680 million in the second quarter, moving closer to its goal of reducing total debt by $15 billion by year-end 2025.