Shares of major airlines plummeted on Thursday following disappointing earnings reports from American Airlines (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV).
Both carriers topped earnings expectations. However, American missed the consensus estimate for revenue and cut its full-year earnings guidance to $0.70 to $1.30 per share, well below the previous range of between $2.25 to $3.25.
The results impacted the share prices in the broader airline sector, with Spirit Airlines (NYSE:SAVE), United Airlines (UAL), and Alaska Air Group (NYSE:ALK) all edging lower at the start of Thursday's session. Meanwhile, London-listed IAG has fallen over 1%.
Following the Southwest results, analysts at TD Cowen said the company's 2Q24 results that came in better-than-expected, albeit against guidance metrics that were significantly lowered mid-quarter.
"The airline reiterated its FY guide, but (as we expected) 3Q assumptions imply losses in that quarter and maybe breakeven at best in 4Q vs current consensus of profits in 2H24," analysts wrote.
"Even with the offset from fuel, management's 3Q24 assumptions confirm our forecast for losses in the quarter," they added. "The company reiterated their full-year guide, which would currently imply about breakeven in the fourth quarter."
Overall, TD Cowen said LUV's guidance for the second half of the year is more bearish than current sell-side estimates (as expected) and the commercial initiatives, while needed, are "unlikely to sufficiently turn the tide."
"We expect the shares to open down and investors to grow concerned about the airline navigating a strategic overhaul during a period of sustained losses/slight profits," analysts concluded.