American Airlines Limits Growth in Effort to Raise Fares

  • Shares jump to five-month high before market slump pares gain
  • Carrier and United improve estimates of revenue measurement

American Airlines Group Inc. trimmed expansion plans in an effort to bolster fares and placate investors by keeping capacity in line with demand. 
 
The carrier also joined United Airlines in providing preliminary third-quarter results of a key financial measure that were better than their forecasts, indicating that U.S. carriers are moving closer to increasing sales from each seat flown a mile, also known as unit revenue.

Investors for more than a year have encouraged airlines to keep growth in check to better match travel demand and allow them to raise ticket prices. Paring expansion also can help reverse more than a year of negative unit revenue. 

American jumped to $39.99, a five-month high, before trimming the gain as the broader market tumbled. The shares rose 1 percent to $39.23 at 10:39 a.m. in New York.

Full-year capacity at American will increase 1.5 percent, half a percentage point less than the previous guidance of 2 percent, the Fort Worth, Texas-based airline said in a statement Tuesday. The change applies to international and domestic regions. Third-quarter unit revenue declined 2 percent to 3 percent from a year earlier, less than a forecast for a drop of 3 percent to 5 percent.

Improved Margin

American also said third-quarter pretax margin, excluding special items, was between 13 percent and 15 percent. It previously forecast 12 percent to 14 percent.

United Continental Holdings Inc. estimated that its unit revenue fell 5.5 percent to 6 percent in the quarter as the timing of some holidays improved sales of premium-priced tickets purchased shortly before travel. The Chicago-based airline forecast that the figure could tumble as much as 7.5 percent.

Southwest Airlines Co. said third-quarter unit revenue fell 3.5 percent to 4.5 percent, as forecast. The decline included the effect of a computer system interruption in July.

United is scheduled to post third-quarter results on Oct. 17. American plans to report on Oct. 20 and Southwest on Oct. 26.

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