American Airlines' Profit and Revenue Decline

American Airlines Group Inc.'s profit fell sharply in its latest quarter amid a revenue decline and a large provision for income taxes.

The company said its top line was hurt by competitive capacity growth, continued global macroeconomic softness and foreign currency weakness, and it recorded a $543 million provision for income taxes. However, adjusted profit topped Wall Street views.

American's unit revenue—the amount the company takes in for each passenger flown a mile—fell 6.3% in the quarter that ended in June. The company earlier this month lowered its unit revenue forecast for the second quarter to a range of a 6% to 7% decline.

American, the top U.S. airline by traffic, and other carriers are struggling with weak unit revenues, caused by too many flights and seats being offered than demand warrants. Still, their bottom lines have been helped in part by significantly lower fuel prices. Total operating expenses in the second quarter were $8.6 billion, down 3.3% from a year ago amid a 24.9% decrease in consolidated fuel expenses.

Delta Air Lines Inc., the nation's No. 2 carrier, reported last week that its profit beat Wall Street estimates while revenue fell more than expected. United Continental Holdings Inc., the No. 3 carrier, reported better-than-expected revenue and profit in its latest period.

American in the latest period posted a profit of $950 million, or $1.68 a share, compared with $1.7 billion, or $2.41 a share, in the year-ago period. Excluding special items, the company said it earned $1.77 a share. Excluding those items and a noncash income tax provision, the company said it earned $2.81. Analysts polled by Thomson Reuters had expected $1.68 a share on an adjusted basis.

Revenue slipped 4.3% to $10.36 billion. Analysts anticipated $10.32 billion.

American's results include a $543 million provision for income taxes at an effective rate of about 38%. It recorded a $15 million provision a year ago.

The company said its capacity increased 1.9% last month while the percentage of seats filled—or load factor—fell to 82.5% from 83.3% in the June quarter a year ago.

American, the result of the late 2013 merger of American Airlines and US Airways Group, has been busy integrating its operations. Just over a year ago the airliner folded US Airways' loyalty plan into its program, AAdvantage, which has about 100 million members. Now it is making good on its pledge late last year to bring make bigger changes to the enlarged program.

Shares were inactive in premarket trading.

Write to Joshua Jamerson at [e-mail]

(END) Dow Jones Newswires

July 22, 2016 08:55 ET (12:55 GMT)

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