American Airlines, Spirit Lower Q3 Profit Outlook, Blame Higher Costs

American Airlines Group AAL and Spirit Airlines Inc SAVE caution that increased expenses will negatively impact their 3Q23 earnings.

American Airlines updated its 3Q23 financial and operational guidance due to a significant increase in fuel prices. 

AAL anticipates fuel costs between $2.90 and $3.00 per gallon (prior $2.55 to $2.65), Capacity to increase by ~6% to 7% compared to 2022 (prior +5.0% to +7.0%), and total revenue to remain mostly unchanged. 

AAL’s adjusted operating margin is projected to be around 4% to 5% (prior ~ 8.0% to 10.0%), with adjusted earnings per diluted share ranging from $0.20 to $0.30 (prior ~ $0.85 to $0.95) versus consensus of $0.65.

Spirit Airlines stated that its 3Q23 guidance is subject to uncertainties, as they witnessed increased promotional discounts and rising fuel costs in recent weeks.

Spirit Airlines updated its 3Q23 guidance and now expects total revenue of $1.245 billion to $1.255 billion (prior $1.300 billion to $1.320 billion) versus a consensus of $1.32 billion. It sees a negative operating margin (14.5)% to (15.5)% (prior (5.5)% to (7.5)%).

SAVE anticipates fuel costs to be $3.60 compared to $2.80 previously estimated, and Available seat miles change vs. 2022 of 13.4% versus prior 13.7%.

Price Action: AAL shares are trading lower by 4.11% at $13.53 and SAVE lower by 2.95% at $16.77 premarket on Wednesday.