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Abu Dhabi, UAESaturday 17 November 2018

American Airlines cuts forecasts amid spiralling fuel costs

As earnings slide, firm had most challenging since a merger with US Airways five years ago, chairman of world's biggest carrier says

American Airlines reported second-quarter earnings fell to $566 million. AP
American Airlines reported second-quarter earnings fell to $566 million. AP

American Airlines is cutting its full-year earnings forecast again after escalating fuel costs weighed on its second-quarter.

The world's biggest airline said Thursday that it now foresees full-year earnings in a range of $4.50 to $5 per share. In April, American cut its forecast for earnings to a range of $5 to $6 per share.

Chairman Doug Parker called it the most challenging since a merger with US Airways five years ago, partly because spiralling fuel costs which led to a more than a $700 million increase in expenses. It expects to spend about $2 billion more on fuel than it did last year.

American earned $566m, or $1.22 per share, down from $864m, or $1.75 per share, last year. Adjusted per-share earnings were $1.63, 4 cents better than that which analysts surveyed by Zacks Investment Research were looking for.

Besides higher fuel, American's revenue is not growing as fast as its major competitors. And it suffered a major blow in June when computer problems at regional subsidiary, PSA Airlines, caused the cancellation of more than 2,500 flights.

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The increase in jet fuel costs is making some marginal flights less profitable. American said it will further trim previous plans to increase flying in the third and fourth quarters. That could help allay investors' fears that American and other airlines are expanding faster than the growth in travel demand, which is preventing them from raising fares to offset fuel prices.

The airline also announced that it will delay the delivery of 22 Airbus jets to reduce capital spending in 2019 through 2021 by $1.2 billion.

In trading before Thursday's opening bell, the shares were up 74 cents, or 2 per cent, to $38.19.

Revenue rose 3.7 per cent to $11.64bn, less than the $11.68bn that analysts were expecting.

Fuel spending at American rose more than 39 per cent from a year ago — an increase of $729m including fuel used by its regional affiliates.