American Airlines Earnings: More Underperformance
On Thursday, American Airlines (NASDAQ: AAL) reported a slightly smaller quarterly loss than analysts had expected. But make no mistake: American's third-quarter results were easily the worst of any major U.S. airline. The carrier expects to lose more money than any of its competitors in the fourth quarter, too. The lesson for investors is clear: steer clear of this troubled company.
Three months ago, many airlines expected to be profitable during the third quarter, thanks to a strong rebound in summer leisure travel. However, despite the improving demand environment, American Airlines never expected to turn a profit in Q3, mainly due to its high cost structure and crippling interest costs. Management's initial guidance called for American to log an adjusted pre-tax margin between -3% and -7%, with revenue down 20% from the third quarter of 2019.
Adding to the airline's woes, demand stalled out near the beginning of August as U.S. COVID-19 case numbers surged. In early September, American Airlines slashed its quarterly forecast, saying that it expected revenue to fall 24% to 28% from Q3 2019, leading to an adjusted pre-tax margin between -10% and -14%.
Source Fool.com
