American Propels Airline Rally With Slower Growth in Seating

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American Airlines Group Inc. helped propel industry stocks to their best rally in more than five months after trimming growth plans in 2015 U.S. seating capacity to help prop up ticket prices.

“Investors have been waiting for domestic cuts,” a Credit Suisse Group AG analyst, Julie Yates, said Friday in a note to investors. With the U.S. Justice Department investigating possible collusion among domestic carriers, “there was some uncertainty whether they would still be communicated.”

The Bloomberg U.S. Airlines Index jumped 4.3 percent, the biggest advance since Jan. 22. Investors have been urging carriers to curb seating-capacity expansion as average fares fall, and Delta Air Lines Inc. and United Continental Holdings Inc. said last month they were reviewing their plans.

American said its U.S. capacity will expand 1 percent to 2 percent, down from an original forecast of as much as 3 percent. The change pares global expansion to 1 percent in 2015, down from an already-lowered April estimate of 2 percent.

“This is the first ‘official’ reduction by a major airline and should be well received,” Helane Becker, a Cowen & Co. analyst, said in a note to clients.

Business Fares

Fares on last-minute flights -- typically a rough measure of business travel -- have declined recently, carriers have said. Offering fewer seats helps airlines match their supply to travel demand, strengthening pricing power.

While analysts have lamented a surge in airline-seating capacity this year that’s outstripping U.S. economic growth, the Justice Department said last week it’s investigating whether carriers are colluding on plans to curb growth.

All 11 carriers in the Bloomberg index climbed, a boost for a gauge that has tumbled 14 percent this year. Fort Worth, Texas-based American rose 3.9 percent to $41.21 in New York.

American said second-quarter passenger revenue from each seat flown a mile fell 6 percent to 8 percent, in line with its forecasts, and that pretax margin excluding special items will be 16 percent to 18 percent.

At an investor conference last month, Delta President Ed Bastian said the carrier was reviewing domestic growth plans with a “bias” toward a reduction. Chicago-based United said it was looking “very closely” at seating and flight plans for after the summer travel season.