Yahoo Finance American Airlines raises profit outlook amid strong demand, cheaper fuel
American Airlines (AAL) expects to post a higher second quarter profit than initially expected, given strong travel demand and lower jet fuel costs.
The airline said it now expected adjusted earnings per share to come in between $1.45 and $1.65, versus its prior estimate of $1.20 to $1.40.
Revenue per available seat mile, a closely watched industry metric, is expected to be down approximately 1% to 3%, better than the prior guidance of a decrease of 2% to 4%.
“This improvement in unit revenue versus prior guidance is driven by continued strength in the demand environment,” said the company in an 8-K filing.
Travel demand is expected to stay hot throughout the summer.
“We’re seeing a ton of demand," Expedia Group (EXPE) CEO Peter Kern told Yahoo Finance Live in May.
"More people want to travel generally. It’s not just revenge travel anymore," he added.
The airline said it expects to pay about $2.55 to $2.65 per gallon of fuel, versus previous expectations of around $2.65 to $2.75.
Jet fuel costs are on a downward trend, with prices about 40% lower compared to last year.
Oil prices have been declining amid recession concerns and speculation that the Organization of Petroleum Exporting Countries may hold off on a production cut when it meets in June.
"OPEC has to play a very sensitive game here," Stephen Schork, founder and editor of The Schork Report told Yahoo Finance Live on Tuesday.
"They certainly want prices higher I would say close to the $80-85 a barrel on the global market. But they certainly don’t want prices much higher than that, because then that increases the chance of economic contraction."
American Airlines stock rose 1% on Wednesday. Year-to-date shares are up 15%.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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