High fuel costs cut sharply into American Airlines profit

Higher fuel costs slashed third-quarter profit at American Airlines by nearly half, and the company said it will respond by growing more slowly and cutting unprofitable flights.

American said Thursday that it expects a key measure of revenue per seat to rise in the fourth quarter.

The shares, which have been battered this year, rose in trading before the opening bell.

American Airlines Group Inc. earned $341 million, down 48 percent from a year ago. Excluding non-recurring items, American earned $1.13 a share, matching the forecast of 16 analysts in a FactSet survey.

Revenue grew 5 percent to $11.56 billion, a company record, even with a $50 million loss from September flights that were canceled during Hurricane Florence.

The increase in revenue was swamped, however, by a jump in fuel costs of more than 40 percent.

CEO Doug Parker said the company will reduce its planned growth, cancel unprofitable flights, delay taking new planes, and manage other costs. American expects to reduce capital spending by $1.2 billion by delaying delivery of 22 new Airbus jets over the next three years.

American also expects to increase revenue by moves such as installing more-legroom seats that command higher prices on more planes used for international flights. “We are confident these actions will return American to both revenue outperformance and earnings growth in 2019 and beyond,” Parker said.

American expects a key measure of revenue per seat to rise by between 1.5 percent and 3.5 percent in the fourth quarter.

Shares were up $1.04, or 3.4 percent, to $31.38, in early trading. They began the day down 42 percent, the worst performer among major U.S. airline stocks.

This article provided by NewsEdge.