American Air defers aircraft delivery, profit beats estimates - Metro US

American Air defers aircraft delivery, profit beats estimates

By Sweta Singh

By Sweta Singh

(Reuters) – American Airlines Group Inc reported a better-than-expected quarterly profit as fuel costs fell and the world’s largest airline said it would defer taking delivery of 22 Airbus planes to be able to adjust capacity according to demand.

American’s shares rose as much as 4.6 percent in morning trading on Thursday.

However, the company joined Southwest Airlines Co , the No.4 U.S. airline by traffic, in warning of a drop in a key profitability metric for the third quarter.

American said it expected revenue per available seat mile (RASM) to fall 3.5-5.5 percent in the current quarter, which J.P. Morgan Securities analyst Jamie Baker said was “at the higher end of our expectations.”

A day earlier, Southwest forecast a decline of 3-4 percent in RASM, a key indicator of an airline’s performance that measures sales against flight capacity.

American said it would defer taking the delivery of the A350 aircraft from Airbus Group to late 2018 through 2022, with an average deferral of 26 months.

The deferral will reduce planned capital spending for 2017 and 2018, the company said.

American’s operating costs fell 3.3 percent to $8.61 billion in the second quarter ended June 30, with fuel costs declining by a fifth.

Net income plunged 44 percent to $950 million as provisions for income tax surged to $543 million from $15 million.

Excluding an item, its profit of $1.77 per share handily beat the average analyst estimate of $1.68, according to Thomson Reuters I/B/E/S.

Operating revenue declined 4.3 percent to $10.36 billion, hurt by intense competition, global macroeconomic headwinds and foreign currency weakness.

There are investor concerns that carriers will continue to add flights and push down prices despite insufficient demand, and rebounding oil prices will add to their fuel costs.

Economic slowdown abroad poses an even greater risk to revenue, with foreigners reluctant to buy tickets on U.S. airlines to visit the United States as the dollar rises in value against other currencies.

American expects pretax margin of about 12-14 percent for the third quarter, excluding special items, compared with 15.4 percent in the second quarter.

The company expects revenue to get a boost from the Olympics, which start next month.

American’s shares were up 2.7 percent at $35.88 in late morning trading. Up to Thursday’s close, the stock had fallen more than 17 percent this year.

(Reporting by Sweta Singh in Bengaluru and Jeffrey Dastin in New York; Editing by Kirti Pandey)

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