American Airlines Beats Q3 Profit Estimates Despite Higher Fuel Costs

American Airlines

American Airlines Group Inc (NASDAQ: AAL)

American Airlines blamed surging fuel costs for a significant drop in its third-quarter profit and vowed to respond by slashing unprofitable flights. The carrier saw profit fall 48% during the quarter, but revenue went up 5% to $11.6 billion.

Shares of the company, which have declined 42% this year, rose 5.7% in the first hour of regular trading on Thursday. The stock has gone down more than 42% year over year.

AAL Earnings & Outlook

The company reported a profit of $341 million, or $0.74 per share, down from $661 million, or $1.36 per share from a year ago. Earnings adjusted for one-time items came in at $1.13 per share in line with analysts’ estimates.

American generated a record of revenue of $11.56 billion during the quarter, representing an increase of 5% year over year. Excluding special items and fuel, operating cost per available seat mile jumped 0.8% from the prior-year period.

Fuel costs increased 42% from the third quarter of the previous year, hurting the company’s earnings. Looking ahead, the carrier still expects earnings of $4.50 to $5 per share for the full year.

Analysts expect the company to report 2018 earnings of between $3.90 and $4.46 per share, according to Refinitiv figures.

American Airlines CEO Comments

“Strong demand for American’s service led to record revenue in the third quarter and our eighth consecutive quarter of unit revenue growth. Our team continues to do an outstanding job of taking care of our customers, including during difficult situations such as Hurricanes Florence and Michael. Unfortunately, higher fuel prices increased our expenses by approximately $750 million versus the third quarter of 2017, which led to a decline in earnings. We have moved quickly to adapt to the higher cost environment with lower planned capacity growth, the cancellation of unprofitable flying, deferral of new aircraft deliveries, and continued aggressive cost management,” said Chairman and CEO Doug Parker.

“We have significant revenue growth opportunities through initiatives such as expanded product segmentation, harmonization of aircraft configurations, and high-margin growth prospects in our most profitable hubs. We are confident these actions will return American to both revenue outperformance and earnings growth in 2019 and beyond and we remain very bullish on the future of American Airlines.”

American Airlines Group, Inc. Company Profile

American Airlines Group, Inc. is a holding company, which engages in the operation of a network carrier through its principal wholly-owned mainline operating subsidiary, American. The firm offers air transportation for passengers and cargo.

It operates through the following geographical segments: Department of Transportation Domestic; Department of Transportation Latin America; Department of Transportation Atlantic; and Department of Transportation Pacific. The company was founded on December 9, 2013 and is headquartered in Fort Worth, TX. – CNN Money