American Airlines plans capacity cuts, tops first-quarter expectations

Fri Apr 24, 2015 1:42pm EDT
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By Jeffrey Dastin

(Reuters) - American Airlines Group Inc (AAL.O: Quote) on Friday reported first-quarter profit above analysts' expectations and pleased investors with capacity cuts to match weakening international demand.

American earned $932 million last quarter, nearly double its profit a year earlier. It earned $1.73 per diluted share excluding special items, compared with analysts' average estimate of $1.71, according to Thomson Reuters I/B/E/S.

American's shares traded up almost 4 percent, reflecting bolstered investor confidence in the carrier, the world's largest after it merged in 2013 with US Airways.

With foreign travelers' spending power hurt by the strong U.S. dollar and in some cases lower oil prices, American slashed more than 1,000 seats it had planned to add to international routes by postponing the delivery of four Boeing Co (BA.N: Quote) 787 aircraft to 2017 from 2016, with another 787 delivery delayed until 2018.

American expects that will cut 2016 capacity by 0.6 percent. It still forecasts 2015 capacity up about two percent compared with 2014, driven more by domestic than international growth.

Rivals Delta Air Lines Inc (DAL.N: Quote) and United Continental Holdings Inc (UAL.N: Quote) have also announced cuts for travel outside the peak summer season.

American's President Scott Kirby said growing capacity and competition with Southwest Airlines Co (LUV.N: Quote) have driven down airfare in Dallas, where the two carriers have major hubs.

Fort Worth, Texas-based American also expects passenger revenue per available seat mile, a unit that measures a plane's carrying capacity, will fall four to six percent this quarter, with the largest impact in the Pacific and Latin America.   Continued...

People walk past an American Airlines logo on a wall at John F. Kennedy (JFK) airport in in New York November 27, 2013. REUTERS/Carlo Allegri