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Fuel weighs on American Airlines, but it tops forecasts

🕐 1 min read

FORT WORTH, Texas (AP) — American Airlines said Thursday that second-quarter profit plunged 34.5 percent on higher fuel costs, and it reduced its forecast for full-year earnings.

American, the world’s biggest airline, said that it expects 2018 profit to be between $4.50 and $5 per share, a cut of 50 cents from an earlier prediction. It expects to spend about $2 billion more on fuel than it did last year.

CEO Doug Parker called the second quarter perhaps American’s most challenging quarter since the December 2013 merger with US Airways. Besides higher fuel, American’s revenue is not growing as fast as its major competitors. And it suffered a major blow in June when computer problems at regional subsidiary, PSA Airlines, caused the cancellation of more than 2,500 flights.

The increase in jet fuel costs is making some marginal flights less profitable. American said it will further trim previous plans to increase flying in the third and fourth quarters. That could help allay investors’ fears that American and other airlines are expanding faster than the growth in travel demand, which is preventing them from raising fares to offset fuel prices.

The airline also announced that it will delay the delivery of 22 Airbus jets to reduce capital spending in 2019 through 2021 by $1.2 billion.

In trading before Thursday’s opening bell, the shares were up 74 cents, or 2 percent, to $38.19.

American Airlines Group Inc. said it earned $566 million in the quarter, down from $864 million a year earlier.

Excluding what American considered non-repeating costs, earnings were $1.63 per share. That was 4 cents higher than the average forecast of 16 analysts surveyed by FactSet.

Revenue rose 3.7 percent to $11.64 billion, less than the $1.68 billion that analysts were expecting.

Fuel spending at American rose more than 39 percent from a year ago — an increase of $729 million including fuel used by its regional affiliates.

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