News Column

American stock moves up as it says profit margins are improving

July 9, 2014

By Andrea Ahles, Fort Worth Star-Telegram

July 09--Shares of American Airlines Group jumped today after the Fort Worth-based carrier told investors that its profit margins would be better than originally expected for the second quarter.

In mid-morning trading, American shares [ticker: AAL] were up about 2 percent, or $1.14, at $41.40.

American said its passenger traffic increased by 1 percent in June as the airline increased its capacity by 3.2 percent.

As a result, its load factor -- a measure of how full its planes were during the month -- dropped 1.9 percentage points to 85 percent, compared with June 2013.

American also updated investors on its second-quarter earnings which it expects to report later this month.

The airline said it will have one-time accounting charges of about $600 million due to bankruptcy and merger items and from selling fuel hedging contracts. American said it no longer has any outstanding fuel hedging contracts as of June 30.

For the second quarter, American expects to pay an average of $3.01 and $3.06 per gallon of mainline jet fuel.

The airline's new projected margin, excluding special items, is 12 percent to 13 percent, compared with a previous range of 10 percent to 12 percent, Bloomberg News reported.

The carrier also told investors that its capacity is expected to be up about 3 percent partly due to larger aircraft replacing smaller planes in its fleet and better aircraft utilization. International capacity will be up 6 percent while domestic capacity will be up about 1 percent.

"Boom. The lights are back on.' These were just two of the initial investor reactions shared with us in immediate response to AAL's pre-market guide-up," J.P. Morgan analyst Jamie Baker wrote in a research note issued after American released its investor update.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk


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Source: Fort Worth Star-Telegram (TX)

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