American Airlines: Weather Hurt 1Q Results


American Airlines Group (NASDAQ:AAL) on Tuesday said flight cancellations due to bad weather hurt its first-quarter results, joining other carriers that blamed the weather for a drag on business during the period.

American grounded more than 34,000 flights in the first three months of this year, reducing quarterly revenue by about $115 million and operating profit by about $60 million.

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The carrier cut its forecast for its operating margin to 5 percent to 7 percent for the first quarter, compared with a late January view of 6 percent to 8 percent.

Flight cancellations tend to boost airline costs during the first quarter, when winter storms hit the hardest. Five U.S. carriers - American, Delta Air Lines, JetBlue Airways , Southwest Airlines and United Continental Holdings - have said disruptions from snow and ice storms forced them to cancel at least 78,000 flights collectively.

United disclosed after markets closed on Tuesday that it canceled about 35,000 flights in the first quarter, most of them at regional carriers. It added the weather-related flight cancellations hurt passenger revenue per available seat mile, or unit revenue, which decreased between 1.5 percent and 2.5 percent compared with the 2013 first quarter.

Shares of some airlines ended lower on Tuesday, with United down 2.3 percent at $43.31 and Delta was off 1.4 percent at $33.51. American rose 0.6 percent to $35.98.

Delta said earlier this month that it canceled 17,000 flights in the first quarter, reducing profit by $55 million and shaving $90 million from quarterly revenue. Delta had cut its operating margin forecast to 6.5 percent to 7.5 percent from 6 percent to 8 percent, but said that measure would still top the year-earlier first quarter's 3.5 percent.

Robert Mann, an aviation consultant in Port Washington, New York, said new U.S. rules requiring more rest for pilots also spurred cancellations. He said the shift of the Easter holiday into April of this year from March of 2013 would likely hurt the first quarter while aiding second-quarter results for airlines.

"The demand environment looks pretty strong," Mann said.

J.P. Morgan analyst Jamie Baker cut his first-quarter profit estimate on American to 51 cents a share from an earlier 63 cents, citing the carrier's revised forecast. He raised his second-quarter estimate to $1.65 from $1.48, citing strong demand.


American Airlines, formed by the December merger of AMR Corp and US Airways, also said on Tuesday that it would eliminate free checked bags for passengers with full-priced economy tickets and make other changes to its baggage and loyalty program mileage redemption policies.

The carrier said the no-free-checked-bag policy would also apply to travelers redeeming AAnytime miles under the American loyalty program. Some higher-level frequent fliers in the American and US Airways loyalty programs will be allowed one less free checked bag, it added.

At the same time, American is lowering the amount of miles required for loyalty program members to get free travel to 20,000 miles one way from 25,000 miles for most of the year. For some of the busiest travel days, such as the Sunday after Thanksgiving, 50,000 miles will be needed for frequent fliers to redeem free flights.

The carrier said it would now allow two free checked bags on flights to South America, eliminating a $70 charge for a second bag. But American said it will start charging a fee for a first checked bag to and from certain cities in Mexico.

American said some of its changes were designed to align its policies with those of Delta and United. Delta announced in late February that it would change its frequent-flier program to tie miles earned to the amount spent on a ticket rather than the distance traveled .

(Reporting by Karen Jacobs in Atlanta; Editing by Lisa Von Ahn, Dan Grebler and Bernard Orr)