American Airlines’ profit clipped
FORT WORTH, TEXAS >> Compared with their checkered track record, major airlines are enjoying boom times.
Planes are full, and jet fuel is still much cheaper than it was last year. The four biggest U.S. carriers just reported a collective second-quarter profit of $3.9 billion.
And yet investors seem to be looking past the bottom line. They have become obsessed with fare prices — falling now for more than a year — that may foreshadow thinner profits in the future.
When the airlines held calls this month to discuss their second-quarter operations, investors pressed them to reduce flights and the supply of seats in order to drive up fares. They cheered when Delta Air Lines Inc. and United Continental Holdings Inc. said that they would trim growth plans in the fourth quarter — sending shares of both higher. And they hammered shares of Southwest Airlines Co., which announced no such pullback — and showed “no sense of urgency,” according to Wolfe Research analyst Hunter Keay. Shares plunged 11 percent, although a massive Southwest technology outage that stranded tens of thousands of its passengers the day before earnings came out may be partly to blame. On Friday, American Airlines Group Inc. became the last of the big four to report results. American, the world’s biggest airline, earned $950 million in the second quarter, beating Wall Street expectations.
Still, profit fell 44 percent from a year ago (partly due to a tax provision), revenue per mile slipped by more than 6 percent on lower average fares, and American said that figure will fall again in the third quarter — even if by a smaller percentage.
“It’s difficult to believe we’d ever be excited” about American’s forecast of 4.5 percent to 6.5 percent lower revenue per mile, but “we’ll take it,” said JP Morgan analyst Jamie Baker.
For the second quarter, American said that, excluding one-time costs, it earned $1.77 per share.