American Air defers aircraft delivery, profit beats estimates

Fri Jul 22, 2016 11:44am EDT
 
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By Sweta Singh

(Reuters) - American Airlines Group Inc AAL.O reported a better-than-expected quarterly profit as fuel costs fell and the world's largest airline said it would defer taking delivery of 22 Airbus planes to be able to adjust capacity according to demand.

American's shares rose as much as 4.6 percent in morning trading on Thursday.

However, the company joined Southwest Airlines Co (LUV.N: Quote), the No.4 U.S. airline by traffic, in warning of a drop in a key profitability metric for the third quarter.

American said it expected revenue per available seat mile (RASM) to fall 3.5-5.5 percent in the current quarter, which J.P. Morgan Securities analyst Jamie Baker said was "at the higher end of our expectations."

A day earlier, Southwest forecast a decline of 3-4 percent in RASM, a key indicator of an airline's performance that measures sales against flight capacity.

American said it would defer taking the delivery of the A350 aircraft from Airbus Group (AIR.PA: Quote) to late 2018 through 2022, with an average deferral of 26 months.

The deferral will reduce planned capital spending for 2017 and 2018, the company said.

American's operating costs fell 3.3 percent to $8.61 billion in the second quarter ended June 30, with fuel costs declining by a fifth.   Continued...

 
Travelers line up at an American Airlines ticket counter at O'Hare Airport in Chicago, Illinois, May 13, 2014. REUTERS/Jim Young/File Photo