American Airlines (AAL) stock plummeted 9.94% in pre-market trading on Thursday, despite reporting better-than-expected second-quarter results. The sharp decline comes as investors focus on the airline's disappointing outlook for the third quarter and full year, which points to ongoing challenges in the domestic travel market.

For Q2 2025, American Airlines posted adjusted earnings per share of $0.95, significantly beating the analyst estimate of $0.78. Revenue also surpassed expectations, coming in at $14.39 billion compared to the projected $14.29 billion. However, the company's forward guidance overshadowed these positive results. American Airlines now expects an adjusted loss per share between $0.10 and $0.60 for Q3, well below the analyst consensus of $0.03 earnings per share. For the full year 2025, the airline projects adjusted earnings per share between a loss of $0.20 and a profit of $0.80, with analysts having previously expected earnings of $0.72 per share.

The weak outlook is primarily attributed to sluggish domestic travel demand and pricing pressures in the U.S. market. American Airlines CFO noted that while domestic capacity is up by about 5% during the July peak, growth would slow to about 2% in August and will be down 1% in September. The company believes the worst is behind them and expects year-over-year revenue to sequentially improve each month in Q3 as industry capacity growth slows and demand strengthens. However, investors remain cautious about the near-term challenges facing the airline industry, including potential shifts in travel patterns and economic uncertainties.