Key Takeaways American Airlines cut its 2025 EPS outlook due to weak demand, tariffs, and high costs.Delta reinstated its 2025 EPS view, boosted by strong passenger revenues and fuel savings.DAL raised its dividend 25% and ended Q2 2025 with more cash than current debt, underscoring strength.Delta Air Lines (DAL) and American Airlines (AAL) are two well-known names in the Zacks Transportation- Airline industry, accounting for a significant market share in the U.S. airline space. Delta, based in Atlanta, GA, ...

Core Viewpoint - American Airlines reported a narrower-than-expected loss per share for Q1 2025, but the loss widened year-over-year, indicating ongoing challenges in the airline industry due to tariff-induced uncertainties [1][7]. Financial Performance - AAL's operating revenues decreased by 0.2% year-over-year to $12.55 billion, with passenger revenues, which account for 90.8% of total revenues, declining by 0.6% to $11.4 billion [4]. - Despite the narrower loss, annual earnings per share estimates for 2025 and 2026 have decreased due to the uncertainty surrounding the airline's outlook [7][8]. Guidance and Outlook - AAL expects earnings per share to be between $0.50 and $1 for Q2 2025 but has withdrawn its full-year guidance for 2025 due to the uncertain economic environment [2][3]. - Other airlines, including Delta Air Lines and Southwest Airlines, have also withdrawn their full-year guidance, reflecting a broader trend in the industry amid economic uncertainty [3]. Market Performance - AAL's stock has declined in double digits year-to-date, primarily due to the slowdown in domestic air travel demand caused by tariffs [9]. - The company's share price has remained relatively stable since the earnings release, but overall performance has been poor compared to industry peers [9]. Valuation - AAL is currently trading at a discount compared to industry levels based on the forward 12-month price-to-sales ratio, with a Value Score of A, indicating potential attractiveness from a valuation perspective [12]. - Low fuel costs, which decreased by 13.2% year-over-year in Q1 2025, could positively impact the company's bottom line [15]. Challenges - The airline faces near-term headwinds from tariff-induced demand slowdowns, high labor costs (with salaries and wages up 9.2% year-over-year), and declining earnings estimates [16][17]. - Given the current uncertainties, it is advised to avoid investing in AAL stock until more clarity emerges [17].