American Airlines’ share price loses altitude after empty seats and higher labour costs weigh on profits
The world's largest airline by revenue, American Airlines, has posted a 56 per cent drop in profit for its third quarter, but managed to beat analyst expectations.
Shares took a hit however, falling some three per cent in New York after the announcement.
The numbers
AA's profit dropped out of the sky over the year, falling to $737m (£601m), or $1.40 per share, from $1.69bn a year earlier.
The drop was largely put down to increased income tax provision, which jumped to $452m in the quarter from $16m a year earlier.
Revenue came in at $10.6bn, beating average analyst expectations of $10.5bn, but still sinking 1.1 per cent.
A fall in fuel costs and related taxes of 12.6 per cent to $1.39bn during the third quarter was largely offset by a rise in labour costs – which jumped 15 per cent – as union workers won pay raises and
Passenger load factor, a measure of how full the planes are flying, fell to 83.3 per cent from 85.6 per cent.
Unit revenue – the amount taken for every seat flown one mile – fell 3.3 per cent, partly due to lower fares.
Why it's interesting
Overcapacity – an issue for other US airlines as well – has continued to plague American Airlines as it grapples with the challenge of integrating US Airways Group into the company following the 2013 merger.
Earlier this month the airline said it would limit 2016 capacity growth to 1.5 per cent as investors push for airlines hold off adding additional routes to push up prices.
The savings from fuel prices is less than in recent quarters although not as big as in recent quarters.
The company's rivals are in a similar position. Last week, Delta Air Lines – the second largest US carrier by revenue – reported a revenue fell for the last quarter, as did United Continental.
What the company said
Doug Parker, chairman and chief executive, praised staff's work on the integration of US Airways, saying:
Nowhere are these efforts more evident than through the seamless completion of our largest IT cutover yet, which combined our fleet and pilot groups onto one system, with no disruption to service. We’re already seeing the benefits as this cutover enables us to schedule our pilots and aircraft as one airline and allows us to further optimise our network to better meet the needs of our passengers.
In short
American Airlines is performing in line with industry peers as companies struggle with a variety of challenges.