American Airlines sees profits fall in 4Q

By Economic IndicatorsAssociated Press

American Airlines reported Thursday that fourth-quarter profit slipped 11 percent as higher costs for fuel and labor offset rising revenue.

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The world's biggest airline also predicted that 2018 earnings would easily surpass Wall Street's expectations, a sign of continuing strong demand for travel.

Still, American couldn't dodge investor concern over too much growth in the airline industry, and the company's shares were headed lower for a second straight day.

United triggered a sharp drop in airline stocks on Wednesday when it disclosed plans to grow passenger-carrying capacity by 4 percent to 6 percent for the next three years. Investors worry that such aggressive growth will cause a glut of seats that will lead to lower airfares and lower airline profits.

American plans to grow, but not as rapidly — more like 2.5 percent to 3 percent this year.

On a call with analysts Thursday, Chairman and CEO Doug Parker argued that American is growing in a more disciplined manner than "in the old days," when carriers expanded widely during good times — often in competitors' strongest markets.

Parker said much of American's growth will involve adding destinations from its own major hubs such as Dallas and increasing flights on existing routes from those hubs.

"We think it is smart, efficient growth where we have competitive advantage" and "doesn't result in fare wars," he said.

In late-morning trading, shares of American Airlines Group Inc. fell $1.72, or 3.1 percent, to $53.07. They began the day up more than 5 percent since the beginning of the year and up 15 percent in the last 12 months.

For the fourth quarter, American said that it earned $258 million, down from $289 million a year earlier.

Excluding one-time gains and costs, American said it earned 95 cents per share. That beat the average Wall Street expectation of 92 cents per share, based on a Zacks Investment Research survey.

Fort Worth, Texas-based American said revenue rose 8.3 percent to $10.60 billion. That also beat analysts' expectations of $10.58 billion.

On the cost side, American reported that fourth-quarter spending on fuel jumped more than 23 percent, and labor expenses rose 7 percent. That caused operating expenses to grow faster than revenue.

American said it expects 2018 earnings between $5.50 and $6.50 per share, well above the $5.32 per share forecast of analysts surveyed by FactSet.

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David Koenig can be reached at http://twitter.com/airlinewriter

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