Airline stocks slide after American cuts revenue forecast

By TransportationFOXBusiness

Airlines raising fares due to higher fuel costs

FBN's Cheryl Casone on the impact of rising fuel costs on airlines' costs and ticket prices.

Shares of American Airlines slid more than 8% on Wednesday, after the airline lowered its second-quarter revenue outlook.

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The airline said it expected revenue per available seat mile it flies – a key revenue figure – to grow around 1% to 3% in the three-month period ended in June, which was lower than its previous forecast of an increase of 1.5% to 3.5%. American cited weakness in the domestic market as the reason for the revision.

“I frankly think today it’s an overreaction,” CFRA airline analyst Jim Corridore told FOX Business. “We’re still seeing unit revenue growth, we think the demand of buying it is still very healthy. And I think that investors are running with the words ‘weaker domestic’ and they’re extrapolating something out it that we don’t think is necessarily the case because numbers are up.”

DALDELTA AIR LINES INC.56.43-0.39-0.69%
ALKALASKA AIR GROUP67.21-0.37-0.55%

Other airline stocks slumped Wednesday as well, as rising fuel costs continue to weigh on names in the sector. Alaska Airlines slid more than 4%, United fell more than 3%, Southwest less than 1% and Delta, which reports second-quarter earnings on Thursday, fell 1.5%.

American’s stock is down more than 30% this year.

The air carrier also said a technical glitch that occurred last month at its regional subsidiary PSA Airlines, which forced the airline to cancel more approximately 3,000 flights, will likely cost about $35 million.

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