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Fuel costs lower American's profit



American Airlines Group
Inc.


AAL 3.96%

Profit slumped 48% in the third quarter. As a result, the world's largest carrier increased relative to US competitors with higher revenue and ticket prices Rising fuel costs

The carrier company Fort Worth, Texas, said on Thursday that an additional $ 750 million in fuel costs impacted the business this quarter and disrupted Hurricanes shook the southern US

Chief executive Doug Parker said reduced capacity growth, the cancellation of unprofitable flights and the postponement of new aircraft deliveries would improve America's performance next year.

"We remain very optimistic about the future of American Airlines," Parker said.

The share of the airline increased by more than 5%. In pre-trading on Thursday, when US expectations that volumes would rise by as much as 3.5% in the fourth quarter, investors and analysts expected slower sales growth.

America's performance has lagged behind that of the competition

Delta Airlines
Inc.,


DAL 1.26%

United Continental Holdings
Inc.


UAL 1.63%

and

Southwest Airlines
Co.


LUV -9.27% ​​

Southwest said Thursday its revenue rose 5.1% in the quarter. Earnings increased 16.5% to $ 615 million or $ 1.08 per share, outperforming analysts' expectations by 2 cents per share.

Earlier this month, Delta said third-quarter earnings were up 13% to $ 1.3 billion. United said earnings rose 30% in the quarter to $ 836 million.

Investors and analysts have examined the debt burden, profit margins and sluggish revenue growth. They also point to increased competition as United expands and America's strong involvement in economically challenging regions such as Latin America.

"They are more involved in weaker markets and less engaged in stronger markets," said Stifel analyst Joe DeNardi. 19659006] Mr. Parker has said Americans should earn a pre-tax profit averaging $ 5 billion every year. As of September 30, 2018, it had earned about $ 1.5 billion before taxes.

A difficult summer travel time did not help. In a record summer of US air travel, America's on-time departure schedule slipped and cancellation rates rose from July, government officials said.

America's missteps make it difficult to attract corporate clients who value reliability and are willing to pay a bit more for it, said JPMorgan Chase & Co. analyst Jamie Baker. Delta and United both posted revenue growth, which is partly due to higher paying business travelers.

America's profit margins have been thinner in recent years than those of its major US competitors. In the third quarter, American said the pre-tax margin was 3.9%, up from 9.7% in the same period last year.

In recent years, American Airlines has made an overhaul of its aircraft fleet. American's total debt as of June 30 was $ 24 billion, more than 3.5 times earnings before interest, taxes, depreciation and amortization. By contrast, Delta's total debt of $ 9.3 billion on September 30 was about 1.1 times higher than its earnings.

While American debt is holding back many investors, the airline's new airline spending is far behind, while other airlines are still behind it. "Some analysts believe the sharp decline in US equities has been an overreaction."

"We see this as a fantastic opportunity," said Patrick Kaser, Portfolio Manager at Brandywine Global, which recently bought American stocks. "We are big shareholders and we have contributed to this position."

American reported earnings of $ 341 million, 74 cents a share, compared to $ 661 million or $ 1.36 in the same period last year. Sales rose 5% to a record $ 11.6 billion.

Write to Andrew Tangel at [email protected] and Alison Sider at [email protected]


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