An American Airlines Airbus A321-231 aircraft sits at the gate in Las Vegas in January. (Photo by ... More Artur Widak)NurPhoto via Getty ImagesAmerican Airlines provided negative current quarter guidance and unusually wide full-year guidance as it reported second quarter results. Its pre-tax margin was again below competitors’.Interviewed on CNBC Squawk Box, American CEO Robert Isom said that in the current quarter, “We see domestic travelers coming back into this.” He said July was a difficult month, part ...

Core Insights - The Zacks Transportation - Airline industry is facing challenges such as economic uncertainties, supply chain issues, high labor costs, and aircraft shortages, leading to a reduction in IATA's traffic and profit forecasts for 2025 [1][11]. Industry Forecast - IATA now projects a net profit of $36 billion for the airline industry in 2025, slightly down from the previous estimate of $36.6 billion, but still higher than the 2024 net profit of $32.4 billion [3][11]. - Total revenues are expected to reach $979 billion in 2025, with passenger revenues projected at a record $693 billion, which is 1.3% higher than 2024 but below the earlier forecast of $1 trillion [4][11]. - The number of passengers is expected to be 4.99 billion in 2025, a 4% increase from 2024, but lower than the previous estimate of 5.22 billion [4]. Revenue Breakdown - Passenger revenues are the primary driver for the 2025 projections, anticipated to be $693 billion, which is 1.6% above 2024 levels [5]. - Ancillary revenues are expected to increase by 6.7% compared to 2024 [5]. - Cargo revenues are projected to decline to $147 billion, a 4.7% year-over-year decrease, due to reduced GDP growth and lower demand [6]. Cost Projections - Total costs for 2025 are projected at $913 billion, which is 1% higher than 2024 but lower than the previous forecast of $940 billion, mainly due to reduced fuel costs [7]. - The average jet fuel cost is expected to decrease to $86 per barrel in 2025 from $99 per barrel in 2024, leading to a total fuel bill of $236 billion [7]. Aircraft Deliveries - A total of 1,692 aircraft are expected to be delivered in 2025, which is nearly 26% lower than previous estimates, with further downward revisions possible due to ongoing supply chain issues [8]. Regional Performance - North American carriers are projected to generate net profits of $12.7 billion in 2025, while European carriers are expected to see profits rise to $11.3 billion, driven by strong passenger demand [9]. - Net profits from Asia Pacific, Latin America, the Middle East, and Africa are expected to be $4.9 billion, $1.1 billion, $6.2 billion, and $0.2 billion, respectively [9]. Investment Opportunities - Companies such as Ryanair Holdings (RYAAY), Copa Holdings (CPA), and SkyWest (SKYW) are highlighted as potential investment opportunities due to their favorable earnings revisions and strong performance despite industry headwinds [2][11][12]. - Ryanair has a Zacks Rank 1 and has shown a 46.6% average earnings surprise over the past four quarters [15][16]. - Copa Holdings also holds a Zacks Rank 1 and has consistently beaten earnings estimates, with an average beat of 5.5% [18]. - SkyWest has a strong earnings surprise track record, surpassing estimates in each of the last four quarters with an average beat of 17.1% [20].