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American Airlines’ downbeat outlook leaves airline sector in the red

American Airlines (AAL), which carried above 198 million passengers in 2017 and holds “the largest airlines of the US” title in terms of the number of passengers consecutively for five years from 2013, clipped its outlook for the second quarter. The downbeat outlook made American Airlines stock register its new yearly low ($35.90) and it also pulled down other airline companies in the Wall Street today.

The company cut down its total revenue per available seat mile (TRASM) growth guidance to approx. 1-3% from the previous growth guidance of approx. 1.5-3.5%, citing the lower than anticipated domestic yields. On a positive note, the company expects costs per available seat mile (CASM) excluding fuel and special items to be up about 2.5% versus the previous growth estimate of about 3.5%.

The carrier expects pre-tax special items to amount to about $215 million, which includes merger integration costs and fleet restructuring expenses. Capex guidance was increased from the earlier estimate of $410 million to $535 million now as the there was a shift in the timing of new aircraft deliveries.

Related: American Airlines hits 52-week low

The Fort Worth, Texas-based airlines also updated that its subsidiary PSA Airlines’ operations were impacted by an IT issue, which made the airlines to cancel around 3,000 flights for a week in June. The company projects that this issue would affect its pre-tax income negatively by about $35 million.

Related: American Airlines reports Q1 2018 results

The airline industry has been affected badly by the surge in the fuel costs. The trimmed outlook of American Airlines added woes to the already struggling peers of the company. Alaska Air Group (ALK), United Continental (UAL), Delta Air Lines (DAL), Southwest Airlines (LUV), and JetBlue Airways were down about 4.3%, 3.4%, 1.5%, 0.9%, and 1%, respectively.

At the end of today’s trading session, shares of American Airlines plunged 8% to $35.96. AAL stock has tumbled about 30% both in the year-to-date period and past one year. The company is expected to announce the results for 2Q later this month.

 

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