American Airlines Earnings Beat Estimates As Expenses Creep Upward

By Ezequiel Minaya Features Dow Jones Newswires

American Airlines Group Inc.'s first-quarter revenue rose 2% and adjusted earnings beat expectations as it earned more money per seat on flights.

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However, investors' concerns may mount as the airline copes with rising fuel prices and labor costs, in addition to how it responds to sector-wide criticism of deteriorating customer service.

Unit revenue for American, the nation's No. 1 airline by traffic, rose 3.1% from a year ago. However, the climb wasn't necessarily linked to more passengers, but to a 1.1% decline in total available seat miles.

Shares of the airline were down 4.7% to $44.20 in premarket trading Thursday.

The airline said Wednesday that it wanted to raise pay for its pilots and flight attendants -- mid-contract -- to keep up with other airlines. The pay raise for flight attendants would be around 5% and for pilots, an average of 8%. The added labor cost would come at a time of rising fuel costs, with that expense rising in the latest quarter 36% to $1.4 billion.

American said its first-quarter operating expenses rose 11% from a year ago to $9.02 billion.

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Airlines are under a harsh spotlight of late amid high-profile clashes with passengers that have been video-recorded, gone viral and stoked calls for reform from Capitol Hill. Earlier this month, a passenger was forcibly removed -- and bloodied in the ensuing melee -- from a flight operated by United Continental Holdings Inc.

American had its own public-relations fire to put out last week when a video posted on social media showed a flight attendant in a heated argument with a passenger who was protesting the way the crew member had treated another customer.

Over all for the latest quarter, American Airlines reported net income of $234 million, or 46 cents a share, compared with $700 million, or $1.14 cents a share, in the year-prior quarter.

Excluding certain items, the airline earned 61 cents a share in the latest quarter, down from $1.25 a year ago. Revenue rose 2% to $9.62 billion.

Analysts surveyed by Thomson Reuters expected 57 cents a share on $9.61 billion in revenue.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

April 27, 2017 09:30 ET (13:30 GMT)