American Airlines 3Q profit falls on lower revenue
In this Monday, Aug. 1, 2016, photo, passengers walk to their gates through the terminal as American Airlines planes wait to depart at O'Hare International Airport in Chicago. American Airlines reports financial results Thursday, Oct. 20. (AP Photo/Kiichiro Sato)
FORT WORTH, Texas (AP) -- More empty seats and higher labor costs are cutting into profit at American Airlines.
But in an encouraging sign for airlines and their investors — and a worrisome one for passengers — American is offering new evidence that higher fares could be just around the corner.
The world's biggest carrier said Thursday that third-quarter earnings fell 56 percent and would have dropped even more if it weren't for continuing low fuel prices.
The company earned $737 million, down from $1.69 billion a year earlier. Revenue slipped 1 percent but costs rose 5 percent.
American was still able to claim that it beat Wall Street expectations. Excluding what it deemed non-repeating costs, mostly related to its 2013 merger with US Airways, the company said it would have earned $1.76 per share. That topped the $1.67 per share forecast from analysts surveyed by FactSet.
American doesn't disclose the average fare that passengers pay, but it was likely less than 1 percent. A key figure, revenue for every seat flown one mile, fell 3.3 percent, partly due to lower fares but mostly because the average flight was less fuel than during summer 2015.
The decline in that figure, called unit revenue, was the smallest recorded at American since the first quarter of last year.
Translation: Airfares have been falling for two years, but they may be about to rise as airlines scale back their growth plans and limit the supply of seats.
American got a break again on fuel prices, although not as big as in recent quarters. The airline and its regional subsidiaries spent 11 percent less on fuel than they did in the third quarter of 2015.
Labor costs jumped 15 percent, however, as union workers won pay raises to make up for years of lower wages after the industry downturn in the previous decade.
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
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