American Airlines (NASDAQ:AAL) shareholders have grown accustomed to disappointment in recent years. After all, the world's largest airline has repeatedly fallen short of its earnings targets due to fuel price volatility, merger-related disruptions, and other factors.

Investors absorbed another dose of bad news last Friday, as American Airlines slashed its 2019 earnings forecast. While management still hopes that the company will be able to grow earnings per share this year, it is now clear that the earnings turnaround investors have been waiting for won't happen until 2020 -- at best.

Mediocre earnings and a subpar forecast

For the first quarter, American Airlines posted record revenue of $10.6 billion -- up 1.8% year over year on a 1.3% capacity increase. However, revenue per available seat mile (RASM) rose an anemic 0.5% year over year. That result was in the lower half of management's initial guidance range, which had called for 0% to 2% RASM growth.

On the cost side, adjusted nonfuel unit costs rose 2.7% year over year last quarter. Fuel costs fell slightly, but total unit costs still increased 1.7%, excluding special items.

As a result, American's adjusted pre-tax margin fell to 3% from 4.4% a year earlier. Adjusted EPS plummeted 30% year over year to $0.52. Officially, that beat the average analyst estimate of $0.51. However, just three months ago, the average EPS estimate for Q1 was $0.73.

An American Airlines plane in flight, with mountains in the background.

American Airlines' "earnings beat" last quarter wasn't very impressive. Image source: American Airlines.

Moreover, American Airlines took a hatchet to its full-year guidance last week. Back in January, management predicted that adjusted EPS would surge to between $5.50 and $7.50 in 2019, compared with $4.55 last year. Now the company says it is on track for adjusted EPS between $4 and $6. That still implies a modest 10% increase at the midpoint of the range.

At least there are some legitimate excuses this time

There are two main reasons for American Airlines' massive guidance cut -- and to some extent, its subpar earnings performance last quarter.

First, after plunging in the last few months of 2018, oil prices have come roaring back in 2019. As a result, American Airlines has raised its fuel cost estimate for the year by $650 million compared to January. Over time, the company would expect to recoup higher fuel prices through fare increases. However, it typically takes a few quarters for adjustments like that to take effect, so management isn't counting on a big improvement in pricing trends in 2019.

Second, the grounding of the Boeing (NYSE:BA) 737 MAX has disrupted American's schedule plans. American Airlines had to remove its 24 Boeing 737 MAX 8s from service in mid-March, and it has pulled them from its schedule through Aug. 19. The lost capacity is driving up unit costs. It's also hurting unit revenue, as American has less inventory available for high-priced, last-minute bookings in the busy spring and summer travel seasons. Management estimates the total negative impact at around $350 million -- assuming Boeing can get the 737 MAX back in the air by mid-August (if not earlier).

A third, smaller issue is that American Airlines made changes to its loyalty program last year to give customers more options for redeeming miles. This is expected to reduce RASM by 0.7 percentage points this year. It will likely have a similar impact on American's pre-tax margin, but it's a completely noncash headwind.

Investors shrug

Coming into the earnings report last week, investors and analysts were already highly skeptical of American Airlines' full-year forecast. As a result, they didn't seem fazed by the huge guidance cut. Indeed, American Airlines shares fell just 1% on the day of the earnings release, and more than offset that decline on Monday with a 2% gain.

On the one hand, this seems like a sensible reaction. The Boeing 737 MAX grounding is only a temporary issue, and if fuel prices remain elevated, American Airlines should be able to raise fares over time. The loyalty program changes also will have no year-over-year RASM impact beyond 2019. In theory, this means that American will face easy comparisons in 2020, and should be able to post strong EPS growth next year.

On the other hand, it's troubling that American Airlines expects adjusted EPS to rise just 10% this year (based on the midpoint of its guidance). While fuel prices are higher than they were three months ago, the company still expects its full-year average fuel price to be lower in 2019 than in 2018. Furthermore, management has said that the carrier should see a $1.3 billion earnings benefit this year from revenue growth and cost containment initiatives.

These tailwinds ought to be driving an earnings recovery in 2019 even in the face of the Boeing 737 MAX grounding, but they aren't. It still seems likely that American's results will improve dramatically next year, but the fact that 2019 now looks like another lost year for American Airlines should certainly be troubling for the company's shareholders.