American Airlines' 2025 Forecast Promising Despite Q1 Challenges, Say Analysts

American Airlines Group Inc AAL reported its fourth-quarter FY24 earnings along with a weak guidance. The following are the comments of the analysts regarding the same.

Raymond James analyst Savanthi Syth reiterated an Outperform rating on the shares and lowered the price forecast from $24 to $23.

This miss in the company’s first-quarter FY25 guidance was mainly due to the recent surge in fuel prices and the timing of year-over-year CASM-ex pressure, which is more concentrated in the first quarter due to the restoration of region-specific capacity, said the analyst.

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Importantly, American is expected to finish 2025 with a favorable low-single-digit year-over-year CASM-ex trend, and its 1Q25/2025 revenue outlook, from this typically conservative management team, exceeded expectations.

The company’s 2025 FCF outlook of over $2 billion was also better than anticipated, according to the analyst, further supporting its deleveraging targets, which are progressing ahead of schedule.

American highlighted sequential increases in its corporate and agency market share and continues to anticipate a full recovery by the end of 2025, noted the analyst. Additionally, all new agreements with the company’s agency partners serving corporate clients have now been finalized.

American projected a 1Q25/2025 revenue growth of 3-5% and 4.5-7.5% year-over-year, respectively, which suggests an approximate 5% and 3.5-4.5% increase in RASM, opined the analyst.

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J.P. Morgan analyst Jamie Baker reiterated an Overweight rating on the shares and maintained the price forecast of $30.00.

The analyst disagrees with the equity market’s reaction to American’s results and guidance.

Looking at the broader picture, the analyst believes that a full-year capacity increase of around 2.5%, with a balanced domestic/international split, is promising for both the airline and the industry.

American’s labor and loyalty programs are in good shape, and its balance sheet repair is ahead of schedule. Free cash flow generation is strong, and while American faces a tough CASM challenge in the first quarter, it seems temporary and well-understood, noted the analyst.

The analyst notes American’s first-quarter forecast somewhat obscures the otherwise positive full-year guidance and balance sheet outlook.

Price Action: AAL shares are trading higher by 0.72% at $17.15 at the last check Friday.

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