Cheaper Jet Fuel and a Big Merger Agree With American Airlines
A big merger and cheaper jet fuel are doing wonders for American Airlines. The world’s biggest airline reported Friday that its net income jumped 80 percent in the third quarter to $1.69 billion despite lower revenue.
Earnings got a big lift as fuel costs plunged 43 percent, a savings of $1.46 billion. American also announced a new $2 billion share-buyback program.
On top of that, the company said it has seen no problems since combining the reservations systems of American and US Airways last weekend. That technology crossover tripped up United Airlines after its merger with Continental.
With the results, American joined Delta, United and Southwest in reporting higher profits in the latest quarter, as lower fuel prices trumped flat or falling revenue.
American’s shares rose 54 cents, or 1.2 percent, to $46.53 in premarket trading about 30 minutes before Friday’s opening bell. They ended Thursday down 14 percent so far this year.
American Airlines Group Inc. said that excluding special items related to its merger and other items such as technology help, adjusted profit was $1.9 billion — the highest in any quarter in American’s history. At $2.77 per share, the results beat the average forecast of $2.72 per share by 15 analysts surveyed by FactSet and nine analysts surveyed by Zacks Investment Research.
Revenue, however, fell 4 percent on evidence of lower average airfares. The $10.71 billion total was slightly less than the FactSet and Zacks forecasts of $10.72 billion.
American doesn’t disclose average fares, but yield, or the amount that passengers pay for each mile they fly, fell 9.2 percent. Airlines have taken advantage of cheaper fuel to increase flights this year, but they have had to cut prices to fill more seats.
American announced a $2 billion addition to its program of buying back its own stock over the next 15 months, a move that usually pleases shareholders by making existing shares more valuable. That raises the amount authorized this year for buybacks to $6 billion. The company also declared a quarterly dividend of 10 cents per share.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on AAL at http://www.zacks.com/ap/AAL