American Airlines (AAL) on Wednesday cut its second-quarter unit revenue outlook, citing weaker pricing power on domestic flight tickets, denting its stock and other airline stocks.
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The carrier said it expected second-quarter unit revenue to increase around 1%-3%, lower than an earlier outlook for a 1.5%-3.5% gain.
Shares of American tumbled 4.2% in the stock market today. The carrier's stock has been at lows not seen before the 2016 election. Airline stocks this year have suffered from higher jet-fuel costs, stiff competition in the U.S. and President Trump's trade-related provocations.
Delta Air Lines (DAL), which reports second-quarter earnings on Thursday, slipped 2.6%. United Airlines (UAL) lost 2.8%. Southwest (LUV) fell 2.3%, touching its 50-day line.
American also said it would lose $35 million in pretax income as a result of computer-system problems at PSA Airlines, a regional airline the carrier owns, that forced the cancellation of some 3,000 flights last month. But it said costs at non-fuel units would only be up 2.5%. That's less than the 3.5% bump expected earlier, due partly to lower-than-expected maintenance costs.
Trade Spat Hits Airline Stocks
The Trump administration on Tuesday said it would impose tariffs on an extra $200 billion in Chinese products. U.S. tariffs targeting $34 billion worth of Chinese products took hold on Friday. Some analysts worry that a full-blown trade war could force companies to cut spending, potentially crimping corporate travel.
As airlines prepare to report second-quarter earnings this month, Wall Street will be focused on how carriers can counterbalance rising fuel prices. American CEO Doug Parker said last month that customers could face rising airfare costs, as higher fuel expenses prompt carriers to pull back on the flights they offer. However, he said such a scenario was unlikely in the near term.
Southwest, which reported June traffic results on Tuesday, has already pared back its full-year flight capacity. Delta could announce its own decision on how many flights it will ultimately offer for the rest of the year when it reports on Thursday.
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The post Airline Stocks Sink As American Cuts Q2 Outlook On Weaker Fares appeared first on Investor's Business Daily.
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