American Airlines raises unit revenue forecast, shares rise
But company says second-quarter pre-tax profit will be reduced by about $185m due to cancelled flights
Bengaluru — American Airlines Group on Wednesday raised its estimate for second-quarter unit revenue as the grounding of Boeing's MAX jets left the leading US carrier with fewer aircraft in service, allowing it to fly fuller planes.
The company’s shares rose 3% in early trading and also lifted the stocks of other airlines, providing some relief to a sector that has been battered by thousands of flight cancellations and reschedules in the wake of the grounding.
The company, however, said its second-quarter pre-tax profit would be reduced by about $185m because it cancelled over 7,000 flights in the quarter.
American Airlines, which has already pulled the MAX off its flying schedule until September 3, had in April cut its annual profit forecast, blaming an estimated $350m hit from the groundings.
The company, which has the second-biggest fleet of MAX aircraft in the US with 24 jets, now expects unit revenue, a measure that compares sales to flight capacity, to increase 3%- 4% in the quarter ended June, compared with its earlier forecast of a rise of 1%-3%.
The airline also raised its forecast for quarterly pre-tax margin, excluding certain items, to a range of 8.5%- 9.5%, from 7%-9%.
Analysts have said non-MAX operators such as Delta Air Lines are expected to do much better in 2019 as they would benefit from reduced supply levels in the form of higher load factors and fares.
Last week, Delta said it expects its quarterly numbers to be at the high end of its previous forecast, helped by “strong demand” in the US.
Delta will report its second-quarter results on Thursday. American Airlines and smaller rival Southwest Airlines, which is the world’s biggest MAX operator with 34 jets, are expected to report results later in July.