American Airlines Revenue Measure Signals Pricing Power RecoveryBy
Carrier boosts capacity growth forecast on regional-jet gains
Pretax profit margin also rose more than company had forecast
American Airlines Group Inc. said a closely watched revenue measure rose more than expected in the first quarter, signaling that a long-awaited recovery in average fares has begun to take hold.
Passenger revenue for each seat flown a mile rose as much as 4 percent, up from a previous forecast that the benchmark gauge known as unit revenue would increase as much as 3.5 percent, according to a statement Tuesday. Pretax profit margin excluding one-time items also exceeded a previous forecast and the airline raised its planned growth in flights and seats.
The results signaled progress for American in a two-year struggle by U.S. airlines to regain pricing power in the wake of a 2015 fare war. Delta Air Lines Inc. said earlier this month that unit revenue fell in the quarter as the price of last-minute tickets recovered more slowly than expected, and United Continental Holdings Inc. said Monday that the measure would be flat compared with a year ago.
American rose 1.5 percent to $42.95 before the start of regular trading in New York.
Pretax margin was 4 percent to 6 percent in the first quarter, up from a prior outlook for 3 percent to 5 percent. Costs for each seat flown a mile, a measure of efficiency, rose 8 percent in the quarter, below the carrier’s January forecast of a 9 percent rise.
American said the supply of flights and seats would increase 1.5 percent this year, up from a prior plan for 1 percent capacity growth. The airline raised the number as it completes more flights and benefits from an increase in new pilots, which enables more flying by regional jets.