American Trims Growth as Unit Revenue Drops Less Than Expectedby
Airline says second-quarter revenue gauge down as much as 7%
Total capacity expectations cut by 0.5 percentage point
American Airlines, the world’s largest carrier, trimmed planned capacity growth this year and said a key industry measure of revenue didn’t fall as much in the second quarter as it expected.
The carrier’s total capacity will rise 2 percent in 2016 over a year earlier, down 0.5 percentage point from its previous outlook. The current plan cuts growth at its main jet operations to 1 percent. Both international and domestic capacity were cut 0.5 percentage points, according to a company filing Wednesday. The change is American’s second reduction in its original growth plans of 3 percent for 2016. The carrier also trimmed expansion by one-half point in April.
American followed United in saying the likely decline in passenger revenue from each seat flown a mile, a measure of financial health that’s slipped for more than a year, was less than forecast. Some investors have pushed for carriers to trim capacity to help boost the gauge known as PRASM. Recent airline schedules showed slowing growth after the end of the summer travel season, according to Hunter Keay, a Wolfe Research analyst.
“Growth is still likely too high but we still expect more trimming as time passes,” Keay said in a report Monday. “Investors still care about pricing trends, of course, but it feels like capacity outlooks matter more than near-term PRASM guides more as each day passes.”
American said second-quarter unit revenue fell in a range of 6 percent to 7 percent, compared with guidance of a 6 percent to 8 percent decline. United said Monday that indicator decreased no more than 6.75 percent in the quarter. Earlier, it had warned the figure could drop as much as 7.5 percent.
The airline is scheduled to release final results for the quarter on July 22. United is set to provide results on July 19.