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American Airlines beats expectations

Published: 15:33 24 Apr 2015 EDT

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American Airlines Group (NASDAQ:AAL) has earned a net profit of US$ 932 million in the first quarter, almost double last year’s amount for the same period thanks to much lower oil prices.

The Fort Worth, Texas company and world’s largest airline earned US$ 1.30/share excluding non-recurring items, while adjusted profit per share was US$1.73.

This quarterly performance exceeded the expectations of 11 Wall Street analysts who had a consensus adjusted profit per share of US$1.70 in a poll by Zacks Investment Research,.

Revenues of US$9.83 billion also beat the analysts’ expectations of US$9.82 billion, though they were 1.7 percent lower than in Q1 2014, which the company has attributed to the higher value of the US dollar, increased competition and lower demand from Latin American markets, especially Brazil and Venezuela.

But, American Airlines, has been able to take full advantage of the low oil prices because it does not have a hedge over fluctuations in the price of kerosene/jet fuel, cutting fuel expenses by 42.2 percent year over year.

American Airlines said it had repurchased US$190 million of its own shares in the first quarter, also reflecting the windfall from the reduced fuel costs.

AA’s shares have dropped slipped four percent since the beginning of 2015, but they are still hovering at a level that is 39 percent higher over the last 12 months.

AA’s competitors, such as Delta Air Lines and United Continental Holdings, to the satisfaction of their shareholders, said they would reduce their International capacity beyond the peak summer season because of the high US dollar. This suggests that AA might do the same.

Meanwhile, AA continues with the assimilation of US Airways, which it acquired in December 2013, including the important task of integrating our passenger service systems according to American Airlines Group’s CEO, Doug Parker, in a letter to employees cited by Reuters.

Presumably, without the integration costs, AA’s performance would have been even better.

AA’s was trading 3.05 percent higher on Friday at US$53.02/share

 

 

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