American Defers Five Dreamliners on Global Seat-Glut Concern

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American Airlines put off delivery of five Boeing Co. 787 Dreamliners to curb growth in international markets where a glut of seats is crimping fares.

Four of the wide-body jets will now arrive in 2017 and the other will be handed over the following year, American said Friday. American also is speeding the retirements of some older aircraft, including single-aisle Boeing MD-80s, and 757s, President Scott Kirby said.

“Demand is still growing, it’s not growing as fast as supply,” President Scott Kirby said on a conference call after parent American Airlines Group Inc. posted a record first-quarter profit. “Our bias will certainly be on the downside” when the carrier provides seating capacity forecasts for the second half of 2015.

The fleet changes at the world’s largest carrier reflect the upheaval in the industry because of the strong U.S. dollar, competition from foreign airlines and economic weakness in parts of Europe, Asia and Latin America. Curbing the supply of available seats lets airlines keep more control over fares.

American rose 2.4 percent to $52.71 at the close in New York for a fifth straight daily gain. The rally pared the stock’s decline this year to 1.7 percent.

American’s average fare per mile and passenger revenue per mile on international flights, both industry benchmarks, fell 4.8 percent and 4.1 percent, respectively, in the quarter. Only the Atlantic region saw increases.

Reacting Responsively

Two weeks ago American said international seating capacity would rise 1 percent this year, 0.5 percentage point less than planned. Last week, Delta Air Lines Inc. said it will cut expansion in global markets by 3 percent in the fourth quarter, and United Airlines followed Thursday with plans to scale back growth outside the U.S. by 0.7 percentage point.

“They, along with the other majors, seem to be reacting in a more responsive way” than in the past to industry changes, said Chris Haimendorf, portfolio manager at Standard Life Investments, which holds shares of American, Delta and Southwest Airlines Co. “Management teams have been extremely adamant that they will be responsive to however overall industry supply and demand progresses and will take the capacity steps needed.”

2016 Target

The Dreamliner deferrals aren’t related to recent struggles with the 787’s seats, American said. The airline received its third Dreamliner Friday and plans for the first to begin domestic commercial flights in May before moving to an international route in June. The five delayed planes were due to arrive in 2016.

American has firm orders for 42 Dreamliners, according to the airline’s latest annual filing. The plane’s carbon-composite fuselage, the industry’s first, helps provide a 20 percent increase in fuel economy over comparable twin-engine models. American received its initial 787 delivery in January.

United amended its Dreamliner purchase plans on Thursday, saying it’s taking 10 Boeing 777-300ERs -- the world’s largest twin-engine jetliner -- instead of the smaller 787. United said that shift reflected its flight needs, not unhappiness with the Dreamliner’s performance.

Domestic travel demand and lower fuel prices helped American triple first-quarter profit to $1.2 billion, or $1.73 a share, excluding some items. The results exceeded the $1.70 average of analysts’ estimates. Sales declined 1.7 percent to $9.83 billion, matching estimates.

American said revenue was restrained by competitive capacity growth, a stronger U.S. dollar and economic weakness in Latin America.

Revenue for each seat flown a mile will drop by 4 percent to 6 percent this quarter, led by continued declines in the Pacific and Latin America, according to the airline.

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