American Airlines flags higher Q3 costs after new pilot contract ratified

Investing.com — Shares in American Airlines (NASDAQ:) fell on Tuesday after the carrier warned that it expects to incur higher costs in the third quarter due to a new collective bargaining agreement with its pilots’ union.

The deal, which was signed off on by American’s pilots on Monday, included over $9.6 billion in increases in total pay and benefits over four years. Overall, the compensation package will bump up pilots’ pay by over 46% during the life of the contract, in a sign of the bargaining power that these employees have following a post-pandemic surge in travel demand.

In a regulatory filing, American specifically noted that a retroactive payout for the opening four months of this year that will also lead to an expense of about $230 million that will be recorded in its third quarter results.

American added that it now expects cost per available seat mile excluding fuel and net special items during the quarter to rise by 4% to 6% compared to the same period last year. The company had previously guided for a jump of 2% to 4%.

Meanwhile, projections for a 2% to 4% full-year uptick in the figure were held steady, largely due to changes in the anticipated timing of other expenses.