American Airlines announced $700 million in first-quarter profit on Friday, beating analyst estimates despite a dip in earnings compared to the $932 million the company brought in over the same time period last year.
American saved more than $600 million off its fuel bill on lower oil prices, but it wasn’t enough to offset a four percent drop in operating revenue, which was $9.4 billion.
The Fort Worth-based company attributed the lower revenues to increasing competition and capacity in the airline industry, softness in its Latin American markets and weaker foreign currencies.
A key measure of how much passengers pay per seat per mile flown dropped by 7.5 percent and is expected to stay down through the year.
“We’re disappointed in our revenue performance on an absolute level and in comparison with our peers,” American’s CEO Doug Parker said during an earnings call Friday morning.. “We don’t view the current revenue trends as acceptable or long term.”
The company also saw results fall as it included a $456 million provision for future income taxes and set aside $73 million for its employee profit-sharing program announced last month.
Still, the company’s $1.25 earnings per share, excluding special items, beat analysts estimates, which had hovered around $1.19.
Parker said he’s “bullish” on American’s future performance as it continues its integration with US Airways following a 2013 merger. The company expects the introduction of new premium and basic economy fares at the end of this year and continued investments in upgrading its planes and lounges to help drive higher revenues in 2017.
“We’re not done with our integration. We’re making investments at a rate that no other airline has done in the past in the product and in our people,” Parker said. “That gives us upside that others don’t have, so we’re very bullish. But look, because we’re bullish that doesn’t mean we’re totally pleased with the current performance because we’re not.”
American executives highlighted Dallas/Fort Worth as one of its strongest performing markets on a year-over-year basis despite a competitive environment fueled by Southwest’s expansion at Love Field and continued pressure from ultra-low cost carriers that has driven passenger fares down.
American’s stock price fell by less than a percent in the opening hours of trading on Friday.
The company’s results were in the middle of the pack for its industry peers, who encountered similar revenue challenges but still posted profits with the help of lower fuel prices.
Delta Air Lines increased its first quarter earnings to $946 million, a 27 percent increase compared to last year, while United Airline’s earnings fell 38 percent to $313 million.
Southwest Airlines reported a first quarter profit of $511 million on Thursday, a 13 percent increase over 2015.
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