American Airlines Group Inc. and United Airlines Holdings Inc. recently provided updates on their most recent quarters and their expectations for the remainder of the year. However, only one of the two airlines experienced an increase in their stock value on Thursday.
American Airlines (AAL) reported their second-quarter results earlier on Thursday, surpassing expectations and presenting an optimistic outlook. On the other hand, United Airlines (UAL) released their report late Wednesday, also exceeding Wall Street’s projections and raising their yearly forecast.
Interestingly, while United’s stock witnessed a positive surge of over 3%, American’s shares faced a decline of more than 5% during midday trading.
Delta Air also contributed to the challenges American and United faced, having recently revised their forecasts for the year. Delta anticipates that the demand for air travel will continue to rise even after summer, particularly with the relaxation of return-to-office mandates and an increase in business and international travel, especially to Europe, in the upcoming fall months.
Citi analyst Stephen Trent highlighted that American’s full-year guidance appeared “modest” compared to their competitors. Investors expressed concern as to why American did not significantly increase their full-year guidance despite consistently surpassing earnings expectations. Trent maintained a neutral rating on American Airlines’ stock.
Additionally, discussions regarding labor contracts for American Airlines’ pilots resurfaced, with executives affirming their willingness to align the pilots’ contracts with those of United Airlines.
These developments may impact American Airlines’ near-term prospects, introducing some uncertainty into the mix.
Labor Negotiations and Financial Outlook in the US Airline Industry
American Airlines and United Airlines, two major players in the US airline industry, have made headlines recently due to their labor negotiations and financial outlook.
Pilot Salary Raises and Benefits
In a significant development, United Airlines recently reached an agreement with its pilots, offering substantial salary raises of up to 40% and additional benefits. This deal has caught the attention of American Airlines pilots, who had already agreed in principle to their own deal back in May. As a result, American Airlines pilots are now considering seeking further improvements in their contract negotiations.
Flight Attendant Contract Negotiations
Financial Outlook
The increased earnings per share guidance for 2023 announced by American Airlines can be largely attributed to the expected decrease in fuel costs. Analyst Savanthi Syth from Raymond James emphasized this point in her note.
In contrast, United Airlines’ raised quarterly and yearly outlook is primarily driven by stronger revenue. Although revenue from air travel to Latin America and domestic destinations fell below expectations, Syth noted that air travel to Europe and Asia Pacific exceeded expectations, providing a significant boost.
Stock Performance
In terms of stock performance, American Airlines’ stocks have risen by 38% year-to-date, while United Airlines’ stocks have seen a 51% increase. These figures outpace the gains of the broader market represented by the S&P 500 index (up about 19%) and the U.S. Global Jets ETF (up 28%) during the same period.
With ongoing labor negotiations and differing financial outlooks, it will be interesting to see how these developments shape the future of the US airline industry.
