American Airlines Earnings Beat Estimates As Expenses Creep Upward

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

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.

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)