As American Airlines flies into its first year after merging with US Airways, fares are up, fuel costs are down, and the company is beating Wall Street's profit predictions.
As American Airlines flies into its first year after merging with US Airways, fares are up, fuel costs are down, and the company is beating Wall Street’s profit predictions.
In the past week, American, United, Delta and Southwest all reported fourth-quarter results that beat analysts’ forecasts for earnings and revenue. The major airlines imposed only two broad fare increases over the past year, according to fare watchers, but they have wrung more money from passengers with other tactics.
One is by raising more money from fees on services such as checking bags. Another is limiting the supply of seats so that the airlines can sell more tickets without resorting to sales. When they do add seats, it’s often on international routes where demand is strongest.
American and US Airways reaped the benefits. Revenue in the last three months of 2013 climbed 9 percent due partly to a 5 percent increase in the amount that passengers paid for every mile they flew.
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Company officials predicted that revenue for every seat flown one mile — a closely watched measure in the airline business — would rise by between 2 percent and 4 percent in the first quarter compared with a year ago. They forecast that fuel prices would fall slightly as the year goes on.
“The industry is doing really well, and (American and US Airways) start at a strong place,” Raymond James airline analyst Savanthi Syth said in an interview.
American Airlines Group Inc., now the world’s biggest airline operator, reported a $2 billion loss for the fourth quarter because of $2.4 billion in special charges, mostly related to American’s bankruptcy reorganization and merger with US Airways. Without those one-time items, the airlines would have earned a combined profit of $436 million, or 59 cents per share. Analysts, who usually exclude items, expected 55 cents per share.
Combined revenue was $9.98 billion, beatings analysts’ forecast by about $90 million.
American’s shares rose $1.59, or 5.3 percent, to $31.77 in afternoon trading, and the Fort Worth-based company led a broad rally in U.S. airline stocks.
CEO Doug Parker vowed Tuesday to make American “the greatest airline in the world.” But airline mergers are never easy, and Parker must combine two separate workforces, fleets and technology systems without causing disruptions for passengers. United has struggled to do that since combining with Continental in 2010.
“The biggest challenge,” Parker told reporters, “is definitely integration and making sure that we go do what we set out to do.”
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