American Airlines forecasts higher quarterly profit on strong holiday travel demand

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American Airlines Group Inc AAL-Q on Thursday forecast a higher fourth-quarter profit on strong demand for travel during the key holiday season, sending its shares up more than 5 per cent in premarket trading.

The upbeat forecast comes at a time when a worsening economic outlook coupled with high inflation has sparked concerns about consumer demand.

Shares of other airlines including Delta Air Lines Inc DAL-N, Southwest Airlines Co LUV-N and United Airlines Holdings Inc UAL-Q were also up between 1 per cent and 3 per cent premarket.

The fourth quarter was difficult for several U.S. carriers as an industry-wide pilot shortage made it tougher for carriers to ramp up capacity and capitalize on a booming travel demand.

During the fourth quarter, American Airlines’ capacity was down 6.1 per cent versus the fourth quarter of 2019, and near the midpoint of its prior guidance of a 5 per cent to 7 per cent fall.

American Airlines expects to report fourth-quarter adjusted earnings per diluted share between $1.12 and $1.17, compared with its prior guidance of $0.50 to $0.70. Analysts had expected a profit of 60 cents, according to Refinitiv data.

The company also forecast a rise between 16 per cent and 17 per cent in revenue from the fourth quarter of 2019. It had earlier forecast revenue growth of 11 per cent to 13 per cent.

It expects costs, excluding fuel, to be up for the fourth-quarter about 10 per cent at the higher end of its previous forecast of 8 per cent and 10 per cent.