American Airlines’ profit plunges 48% as fuel costs sting

American Airlines‘ third-quarter profit fell more than 48 percent from a year earlier as higher fuel costs ate into the largest airline’s bottom line, despite high travel demand.

But the carrier on Thursday maintained its earnings forecast of $4.50 to $5 per share for 2018, above the $3.90 to $4.46 a share expected by analysts polled by Refinitiv.

The airline said it expects to grow revenue for each seat it flies per mile, a key industry metric, by as much as 3.5 percent in the last three months of the year, according to its third-quarter earnings report.

American’s shares were up more than 7 percent in morning trading.

American’s net income for the three months ended Sept. 30 came in at $341 million, or 74 cents a share, down 48 percent from $661, or $1.36 a share, from the same quarter last year. It generated record revenues of $11.56 billion, which just missed analysts’ estimates and were up 5.4 percent up from $10.97 billion the previous year.

Fuel costs, which surged 42 percent from a year ago, ate into its profit.

“Strong demand for American’s service led to record revenue in the third quarter and our eighth consecutive quarter of unit revenue growth,” CEO Doug Parker said in a statement. “Unfortunately, higher fuel prices increased our expenses by approximately $750 million versus the third quarter of 2017, which led to a decline in earnings.”

American posted per-share earnings of $1.13 on an adjusted basis, in line with Wall Street’s expectations.

American Airlines’ shares are down more than 37 percent this year, more than any other U.S. airline, as fuel prices rose and the company indicated its revenue for each seat it flies a mile would grow by less than some of its rivals.

The stock move has ramped up pressure on Parker to convince investors that the airline can grow its bottom line as costs climb.

Southwest Airlines, which also reported its third-quarter earnings before the markets opened Thursday, reported profits that came in above analysts’ expectations. But the carrier’s shares were down by more than 5 percent in morning trading after the carrier said its expenses rose more than 7 percent, excluding fuel costs. It also said expenses, excluding fuel and profit-sharing, would rise in the fourth quarter by as much as 1 percent from a year earlier.