Can AAL sustain its Q4 earnings momentum into 2025?

**American Airlines (AAL) faces challenges in sustaining its fourth-quarter (Q4) earnings momentum into 2025**, and several factors indicate why: 1. **Strategic Misstep Impact**: AAL's aggressive sales strategy in 2023, which focused on renegotiating contracts with corporate travel agencies while cutting back on perks and discounts, backfired, leading to a dent in revenue and a damaged image. The company spent much of 2024 rebuilding its sales strategy and mending relationships with corporate travelers to regain lost customers. 2. **Fuel Price Increase**: Jet fuel prices have risen sharply, which is a significant cost for airlines. This uptick, driven by broader sanctions targeting Russian oil revenue and growing optimism about stronger demand from China, could squeeze margins and reduce profitability. 3. **Labor Cost Pressure**: AAL has forecasted higher costs due to expensive labor contracts signed in 2024. The company expects non-fuel unit costs to be up mid-single digits year-over-year, with most of the cost growth coming from higher salaries and benefits. This could compress margins and reduce earnings in 2025. 4. **Analyst Expectations**: Analysts have lowered their expectations for AAL's 2025 profit, with the company forecasting adjusted earnings per share (EPS) in the range of $1.70 to $2.70, compared with analysts' average estimates of $2.42. This suggests that sustaining the Q4 momentum could be difficult. 5. **Market Conditions**: The airline industry is highly competitive, and AAL faces challenges from rivals like Delta Air Lines and United Airlines, which have seen significant stock price increases due to improved pricing and strong winter demand. Maintaining its earnings momentum will require outperforming these competitors. In conclusion, while AAL has shown strong earnings in Q4, the company's strategic missteps, increased fuel prices, labor cost pressures, and analyst downgrades suggest that sustaining this momentum into 2025 could be challenging. The airline will need to navigate these factors carefully to maintain its financial performance.