American Airlines beats profit forecasts
American Airlines, Philadelphia's largest carrier, reported a record fourth-quarter profit Friday on falling oil prices and strong corporate travel. Business customers and all fliers also fared well, paying lower ticket prices in the latest quarter as American matched the fares of discount carriers Spirit and Frontier Airlines, which have been expanding in cities including Philadelphia.
American Airlines, Philadelphia's largest carrier, reported a record fourth-quarter profit Friday on falling oil prices and strong corporate travel.
Business customers and all fliers also fared well, paying lower ticket prices in the latest quarter as American matched the fares of discount carriers Spirit and Frontier Airlines, which have been expanding in cities including Philadelphia.
American said it plans to roll out a "basic economy fare" in the second half of this year to compete with the "no frills" ticket prices of Spirit and Frontier.
"Details to come," said American president Scott Kirby on a call with investors.
American earned $1.3 billion, or $2 per share, in the latest quarter up from $1.1 billion a year earlier. Analysts expected $1.97 per share.
However, revenue in the fourth quarter dropped to $9.64 billion, from $10.2 billion a year earlier, due to lower fares, less traffic in Latin America, and a strong U.S. dollar that has affected international travel.
Passenger revenue for each mile flown, a key industry measure, fell 8.9 percent.
American saw a 17 percent drop in passenger unit revenue in Latin America, especially in Brazil and Venezuela, due to weak economies and currency devaluation.
American has battled for passengers and cut fares in Dallas, where rival Southwest Airlines has aggressively increased flights at Dallas Love Field. American's headquarters and home airport is Dallas-Fort Worth.
American reported a full-year 2015 profit of $6.3 billion, up from $4.2 billion the year before.
American benefits from cheaper oil more than its competitors because it is the only major airline not to buy expensive fuel hedges in advance to lock in rates and protect against swings in oil prices. American pays market prices for fuel, a boon during times of cheaper oil and a risk when oil prices are high.
American forecast that passenger unit revenue will decline between 6 percent and 8 percent in the current first quarter.
The carrier, which operates 76 percent of the flights at Philadelphia International Airport, said it has not seen a measurable impact in cancellations due to the Zika virus, a mosquito-borne disease. The Centers for Disease Control and Prevention has warned pregnant women to postpone travel to affected areas, such as Mexico, Puerto Rico, and the Caribbean.
"It's obviously a little early to tell if it will have any impact on travel," Kirby said. "We haven't seen an effect yet."
American shares closed up 85 cents, or 2.23 percent, at $38.99 Friday.
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