American Airlines' Profit and Revenue Decline
July 22 2016 - 09:10AM
Dow Jones News
American Airlines Group Inc.'s profit fell sharply in its latest
quarter amid a revenue decline and a large provision for income
taxes.
The company said its top line was hurt by competitive capacity
growth, continued global macroeconomic softness and foreign
currency weakness, and it recorded a $543 million provision for
income taxes. However, adjusted profit topped Wall Street
views.
American's unit revenue—the amount the company takes in for each
passenger flown a mile—fell 6.3% in the quarter that ended in June.
The company earlier this month lowered its unit revenue forecast
for the second quarter to a range of a 6% to 7% decline.
American, the top U.S. airline by traffic, and other carriers
are struggling with weak unit revenues, caused by too many flights
and seats being offered than demand warrants. Still, their bottom
lines have been helped in part by significantly lower fuel prices.
Total operating expenses in the second quarter were $8.6 billion,
down 3.3% from a year ago amid a 24.9% decrease in consolidated
fuel expenses.
Delta Air Lines Inc., the nation's No. 2 carrier, reported last
week that its profit beat Wall Street estimates while revenue fell
more than expected. United Continental Holdings Inc., the No. 3
carrier, reported better-than-expected revenue and profit in its
latest period.
American in the latest period posted a profit of $950 million,
or $1.68 a share, compared with $1.7 billion, or $2.41 a share, in
the year-ago period. Excluding special items, the company said it
earned $1.77 a share. Excluding those items and a noncash income
tax provision, the company said it earned $2.81. Analysts polled by
Thomson Reuters had expected $1.68 a share on an adjusted
basis.
Revenue slipped 4.3% to $10.36 billion. Analysts anticipated
$10.32 billion.
American's results include a $543 million provision for income
taxes at an effective rate of about 38%. It recorded a $15 million
provision a year ago.
The company said its capacity increased 1.9% last month while
the percentage of seats filled—or load factor—fell to 82.5% from
83.3% in the June quarter a year ago.
American, the result of the late 2013 merger of American
Airlines and US Airways Group, has been busy integrating its
operations. Just over a year ago the airliner folded US Airways'
loyalty plan into its program, AAdvantage, which has about 100
million members. Now it is making good on its pledge late last year
to bring make bigger changes to the enlarged program.
Shares were inactive in premarket trading.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
July 22, 2016 08:55 ET (12:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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