FILE PHOTO: A barge carrying a crane transports parts of the wreckage from the Potomac River as an American Airlines plane lands on the runway, in the aftermath of the collision of American Eagle flight 5342 and a Black Hawk helicopter that crashed into the river, by the Ronald Reagan Washington National Airport, in Arlington, Virginia, U.S., February 5, 2025. REUTERS/Eduardo Munoz/File Photo

By Shivansh Tiwary

(Reuters) -American Airlines raised its 2025 profit forecast on Thursday, signaling that industry-wide capacity cuts following a demand slump earlier this year had begun to yield pricing gains, sending its shares up 4% in morning trading.

A slowdown in domestic travel earlier this year, driven by economic uncertainty stemming from President Donald Trump's sweeping tariffs, had left airlines in a bind, and pushed them to cut fares to fill seats.

Since then, major carriers have scaled back capacity to restore pricing power and safeguard margins.

The Fort Worth, Texas-based carrier said unit revenue, a key gauge of its ability to charge more for seats on offer, improved sequentially through the quarter, with September marking a return to positive growth.

Carriers have also indicated an improvement in domestic travel demand as Americans show resilience toward economic uncertainty.

American Airlines now expects full-year adjusted profit per share in the range of 65 cents to 95 cents, a sharp turnaround from its July forecast of a 20-cent loss to an 80-cent profit.

"Premium unit revenue growth year over year continues to outperform the main cabin," American said on Thursday.

High-margin premium services, meanwhile, have remained strong, as affluent travelers continue to pay a premium for a more comfortable journey. A post-pandemic shift has found airlines firming up their bets on premium services.

"We are encouraged by American's results and view it as another indication of the importance of premium cabin and loyalty revenues," TD Cowen's Tom Fitzgerald wrote in a note.

For the quarter through September, the U.S. carrier reported a smaller-than-expected adjusted loss of 17 cents per share. Analysts were expecting a 28 cents loss, according to data compiled by LSEG.

On Wednesday, domestic peer Southwest reported a surprise profit, helped by an improvement in travel bookings.

American's total operating revenue marginally rose to about $13.69 billion, beating expectations of $13.63 billion.

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli)