American Airlines {{ m-tag option="price" ticker="AAL" currency="USD" }} reported a third-quarter loss of $545 million, prompting the company to trim its profit forecast for the year. The loss is attributed to higher fuel prices and labor costs due to a new contract with pilots.

The carrier's revised full-year earnings forecast stands between $2.25 and $2.50 per share, down from an earlier estimate of $3 to $3.75. This broadly aligns with Wall Street expectations, which had already adjusted for the creeping jet fuel prices. American also expects a full-year adjusted operating margin of 7%, a drop from a previous forecast of as much as 10%.

Q3 Performance Metrics:
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In the third quarter, American Airlines' adjusted earnings per share were 38 cents, surpassing the expected 25 cents. However, the total revenue of $13.48 billion slightly missed the expected $13.52 billion.
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While the travel industry has seen a resurgence since the end of the Covid pandemic, especially for international destinations, fares have generally dropped compared to last year. American's unit revenue is expected to fall between 5.5% and 7.5% in the fourth quarter, with unit costs, excluding fuel, rising by 5% to 7% year over year.
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American's Q3 results contrast sharply with its closest competitors, United Airlines {{ m-tag option="price" ticker="UAL" currency="USD" }} and Delta Air Lines {{ m-tag option="price" ticker="DAL" currency="USD" }}, which reported rising revenue and a profit of $1.1 billion for the quarter.

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Strategy and Future Plans:
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CEO Robert Isom noted that the company is rethinking its route development strategy. Americans will focus more on profitable routes and have "very little tolerance" for developmental routes that are not making money.
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The airline's Q3 loss was further impacted by $983 million in charges for contract-ratification bonuses paid to pilots. Labor costs at America jumped 17%, an increase of nearly $600 million.
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Revenue was up by a marginal 0.1% from the year-ago period. American's CFO, Devon May, attributed this to timing, stating that while American grew more quickly last year, this year, United and Delta are "catching up."

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Fuel Costs & Industry Outlook:
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American expects to pay between $3.01 to $3.11 per gallon for fuel in the fourth quarter, up from $2.91 in the third. Although fuel prices are still lower than last year, the outlook could add to concerns over rising costs across the industry.

The company managed to pay down $1.4 billion in debt during the quarter. However, its stock performance has been lackluster, closing up less than 1% on Thursday after losing 5% on Wednesday.

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Conclusion:

American Airlines faces a challenging landscape due to rising costs and intense competition. However, its focus on cost control and strategic route planning offers a pathway for potential financial recovery.

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