American improved its outlook thanks to champagne and coffee on board. Shares soared 6%
Expensive seats are outpacing the sales growth rate of "regular" seats
American Airlines shares jumped after the airline revised its profit forecast for the rest of 2025, beating Wall Street expectations. The optimism is attributed to growing demand for premium services, including Lavazza coffee and Bollinger champagne on board, as well as investment in airport infrastructure. Analysts at TD Cowen assessed the airline's prospects positively and reiterated their recommendation to buy its securities.
Details
Shares of American Airlines rose by 5.6% to $12.77 at the end of trading on October 23. It became the maximum closing price since September 11. On extended trades after closing of the main session securities lost 0.23% of their value.
The company said it expects adjusted earnings per share for the fourth quarter of 2025 to be in the range of $0.45-0.75, based on current bookings, projected demand and fuel prices. The full-year 2025 figure will be $0.65-0.95, American expects. That's a sharp turnaround from its July forecast, when the carrier anticipated results ranging from a loss of 20 cents to a profit of 80 cents, Reuters noted. And the quarterly outlook was above market expectations of 30 cents a share, MarketWatch wrote.
Net loss narrowed to $114 million in the third quarter from $149 million in the same period last year. The adjusted loss of 17 cents per share was better than analysts' forecast of 28 cents, MarketWatch added.
Reasons for optimism
American Airlines has noted an increase in demand for premium seats, which is outpacing the rate of sales of the main cabin. The company's management attributes this to passengers' willingness to pay for comfort and quality service. "People are willing to pay for the experience. We're going to make sure our product makes them happy," CEO Robert Isom told MarketWatch.
The airline is expanding premium service with Lavazza coffee and Bollinger champagne, expanding premium seats at nearly twice the rate of economy class, and investing in new lounges and passenger amenities, MarketWatch added.
What the analysts are saying
Since the beginning of 2025, American Airlines stock is down 27.5%, reflecting general market volatility and challenges in the airline industry.
TD Cowen analyst Tom Fitzgerald reiterated a "buy" rating on the stock after the reports were released. "We believe American Airlines will have strong momentum in 2026 as it benefits from indirect market share recovery, favorable changes in sales mix due to premium seats and aircraft capable of international flights," Fitzgerald said in a MarketWatch note.
According to MarketWatch, 24 analysts have rated American shares. Slightly more than half (52%) recommend buying (Buy and Overweight ratings), 44% advise holding (Hold), and only 4% recommend selling (Underweight and Sell). The average target price is $14.4, which implies an upside of about 13% from the current price.
This article was AI-translated and verified by a human editor
