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American Airlines stock has a bumpy landing despite a Q3 earnings beat

Yahoo Finance anchors discuss American Airlines stock performance after reporting third-quarter earnings.

Video Transcript

DAVE BRIGGS: My play is AAL, American Airlines. You'd think the stock is soaring on spectacular Q3 earnings, right? Well, not so much. American is the latest domestic airline, though, to report a very strong quarter, beating expectations, seeing revenue surge 50% to $13.46 billion. Their CFO Derek Kerr saying-- and we've heard this from all of them-- we currently see no signs of demand slowing. We heard that from United. We heard it from Delta.

American expects Q4 revenue 11% to 13% higher than the same period in 2019, with slower than planned aircraft deliveries and a shortage of regional pilots. Potentially, the downside here hampering growth a bit. Their CEO, Robert Isom, said the pilot shortage could take three years to resolve. That is a massive problem across all the domestics. Perhaps that or a buy the rumor, sell the news situation, why the stock is actually down about 4% today, shockingly, and 28% year to date.

One further note I want to discuss with you, Josh, international first class-- they plan to drop it. They say no one is buying it, which is fascinating because we're seeing on the high end of luxury spending, there's been no demand destruction. Surprise-- they're going to replace it with all business.

JOSH SCHAFER: I'm very surprised by that. Every other company you look at, right, it seems like it's a trade-up environment when it's high-end. When we're talking high-end goods, people are trading up. So interesting to see them cut that. I don't know, Seana. I don't know if I want to fly all the way to Europe in business class, right?

SEANA SMITH: But, you know-- but they still have the [INAUDIBLE]. Wow, I didn't know that you were such a bougie traveler here.

[INTERPOSING VOICES]

You are somebody here every day on set. But I think it is important to point out why they are doing this. They were saying that they simply just did not see the demand from the customers. People weren't willing to pay up for that first class seat, so they're going to replace it with business class, which people seem to be much more willing to pay for, obviously, because it's a little bit cheaper. It still is going to cost you a lot. So if you're not willing to go into coach, I think it's going to be costing you quite a bit on your next trip.

It is interesting, though, to see the stock react the way it is today, Dave. It's hard to make sense of it. I think maybe it rose after we saw the strong results from Delta and United over the past week and a half. So now that maybe some of the excitement has already been baked into the stock, which is why we're seeing that 3 and 1/2% dip today. But the demand--

DAVE BRIGGS: That's my only theory.

SEANA SMITH: --very, very strong.

DAVE BRIGGS: This report is strong top to bottom, as its forecast.

SEANA SMITH: It is very strong, yes. It's kind of unbelievable when you look at the strength there of a lot of the airlines this quarter.