American Airlines Q3 Profit Dips 49% But Beats Analysts’ Estimates

An increase in price of aircraft fuel and higher operating expenses saw a 49 per cent drop in the earnings of American Airlines Group Inc. (AAL) for the third quarter.

However, the bottom line results still exceeded the estimates of Wall Street, the top line was lower than the consensus estimates.

The announcement of the results saw the share price of the airline surge up by 5 per cent in pre-market trading.

The third quarter net income dropped significantly by 48.4 per cent at $341 million or $0.74 per share. A large part of this was a $50 million git that the airline took on its pre-tax earnings because of the impact of Hurricane Florence which forced downing of flights. There was a decrease in earnings per share at $1.14 per share from $1.50 per share a year ago excluding special items.

The airlines reported a 5.4 per cent increase in total operating revenues at $11.56 billion driven by strong demand for tickets and air travel.  But a significant increase in aviation fuel partly offset the increase in revenues from increased travelling demand.

The shareholders of the company were distributed a total of $46 million in dividends as the company further declared a dividend of $0.10 per share as on October 25, 2018 which would be payable on November 20, 2018 for shareholders of record as of November 6, 2018.

Anticipating future increase in fuel prices, capital expenditure for the years 2019, 2020, and 2021 was reduced by the airlines by $1.2 billion in the way of deferring of deliveries of 22 new Airbus A321neos which it was scheduled to receive during various times of the above mentioned years.

In its forward looking statement for the fourth quarter, American Airlines predicted an increase in its TRASM by about 1.5 per cent to about 3.5 per cent year-on-year. The company also forecast a pre-tax profit margin, excluding special items, of being anywhere between 4.5 per cent and 6.5 per cent. American Airlines continues to expect its 2018 diluted EPS excluding net special items to be between $4.50 and $5.00 based on this guidance.

While deferring deliveries, American Airlines said hat it would go ahead with its program of installation of Premium Economy class which is currently available in 92 of its widebody aircraft. The airline anticipates that the program would get completed by the middle of 2019. Main Cabin customers continue to select this highly-differentiated product and the company expects to drive more value from this product with new revenue management and merchandising initiatives in 2019.

There was a 1.8 per cent increase in the passenger revenue per available seat mile (PRASM) for the third quarter. This rise was primarily driven by an enhancement in passenger yields. Further, an appreciation in yield and a rise in volume helped the airline to mark a 16.4 per cent in its cargo revenue for the period.

(Adapted form


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