American Airlines is guiding to a much better fourth quarter (Q4) performance than the company originally anticipated, providing a stark contrast to the financial challenges its rival Southwest Airlines faces in the short term.
American is expecting an adjusted operating margin of 10.25% to 10.5% for its 2022 Q4 compared with previous forecasts of 5.5% to 7.5%. Its top-line revenue is expected to increase by 16%-17% compared with the same period in 2019. Previously, American expected revenue growth of 11% to 13%.
The airline’s earnings per share for the quarter will now fall between $1.12 to $1.17 per share versus a previous target of $0.50 and $0.70 per share.
The company’s net income projections are $768 million to $803 million.
American’s bullish financial forecast is a distinct juxtaposition from recent projections provided by Southwest Airlines after its operational meltdown during the year-end 2022 holiday. Southwest forecasts the disruptions will result in a negative effect on its Q4 pre-tax performance of $725 million to $825 million.
Cowen analyst Helane Becker explained in a recent research report that American’s “revenue and yields outperformed our prior expectations, likely driven by strength in American’s core markets.” She noted that American’s hubs at Dallas-Fort Worth International airport and Charlotte Douglas “performed particularly well in December.”
Becker said that American also performed well during the holiday season, and “we suspect they picked up a lot of business from Southwest.” Data from Aviation Week’s CAPA show that American and Southwest are the first and third largest U.S. domestic airlines, respectively, measured by departing frequencies. American holds a 22% share followed by Delta Air Lines at 19% and Southwest’s 18% share.
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