American expects grounded jet to cut profit by $400 million
FORT WORTH, Texas (AP) — American Airlines said Thursday that the long grounding of Boeing 737 Max jets will cut its pretax earnings for 2019 by about $400 million, including $175 million in the second quarter.
The new estimate of damage from the Max grounding is $50 million more than American’s previous guidance.
American updated the figure as it announced that second quarter profit rose 19% to $662 million.
The world’s biggest airline has struggled with thousands of cancelations this summer — some caused by the loss of its 24 Max jets and some due to what the airline claims is an illegal work slowdown by mechanics angling for a better labor contract.
Chairman and CEO Doug Parker said employees “did a tremendous job to deliver solid results despite a challenging start to our summer.”
American has removed the Max from its schedule until Nov. 2. Boeing expects the Federal Aviation Administration to clear the plane to resume flying in October after Boeing finishes changes to flight-control software implicated in two crashes that killed 346 people.
On a call with analysts, Parker expressed confidence that passengers will feel comfortable flying on the Max despite the crashes in Indonesia and Ethiopia.
Parker said that after the FAA deems the updated plane to be safe “and our pilots believe they are adequately trained to fly the aircraft ... (that) will make the difference in consumer attitudes about the aircraft itself.”
American executives said they saw a drop in last-minute bookings for more than a month after the Max was grounded in mid-March. They said business travelers booked on other airlines to avoid American because they feared missing meetings due to a canceled flight. Those bookings have bounced back, they said.
The Fort Worth-based company said that excluding non-repeating costs, it would have earned $1.82 per share, 5 cents better than the average estimate of 10 analysts surveyed by Zacks Investment Research.
American said revenue rose 3% to $11.96 billion, in line with analysts’ forecasts.
Operating costs rose less than 2%, helped by a slight decrease in fuel, the airline’s second-biggest expense behind labor.
American said it expects full-year earnings between $4.50 and $6 per share.
Shares of American Airlines Group Inc. fell $1.14, or 3.3%, to $33.45 in morning trading. They have fallen nearly 8% in the last 12 months.
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 https://www.zacks.com/ap/AAL