American Airlines raised its revenue guidance for the second quarter on Friday thanks to an increase in travel demand.
Rising fuel and labor costs, however, continue to nag the sector.
American Airlines (ticker: AAL) said its June quarter revenue will be above pre-pandemic levels. The company expects revenue to grow 11% to 13% from the same quarter in 2019, compared with a previous forecast of 6% to 8%. Fuel costs, however, are expected to increase $3.92 to $3.97 a gallon, up from a previous estimate of $3.59 to $3.64.
The company also lowered second-quarter flight capacity estimates. It now expects available seat miles to decline 7% to 8% from 2019 levels, compared with a previous forecast of a 6% to 8% drop.
The stock, however, fell 6% on Friday, following a broader market decline in the wake of the May jobs report. The S&P 500 tumbled 1.7%,
American is the latest to offer an improved sales outlook as consumers choose to travel rather than spend on discretionary goods.
On Thursday, Alaska Air (ALK) also offered a more optimistic outlook for revenue growth. It now expects second-quarter revenue to increase 12% to 14% compared with prepandemic levels, marking a sharp increase from its its previous guidance of 5% to 8% growth. Alaska also raised its fuel cost guidance because of higher commodity costs, estimating fuel costs between $3.65 and $3.68 per gallon for the second quarter, compared with its previous range of $3.25 to $3.30 a gallon.
"The improved revenue outlook implies continued success in jet fuel cost pass through," Cowen analyst Helane Becker wrote in a research note Friday. "We are maintaining our Outperform rating and price target of $85 or 11.9x our 2023 EPSestimate." Becker said she expects Alaska to take advantage of the competitivelandscape as the environment normalizes.
Delta Air Lines (DAL) also said Wednesday it expects second-quarter adjusted revenue to be fully restored to 2019 levels, with a forecast for adjusted total revenue between $12.4 billion to $12.5 billion. Full-year 2019 revenue was $12.4 billion.
Alaska Air stock slipped 0.3% Friday, while Delta stock fell 4%.