American Airlines Group Inc., finishing its second-best quarter in history despite a raft of one-time items and a new income-tax provision, beat Wall Street estimates even though its total revenue dipped by 1.1% and its unit revenue was down 2.2%.
The nation's largest airline by traffic predicted that its unit revenue could be flat to up slightly in the period of November through January, and said its Latin American routes already have returned to positive unit revenue. Unit revenue, a much-watched metric, measures the total revenue for a seat flown a mile. The industry has been grappling for a couple of years with declines in this measure due to overcapacity, foreign currency weakness and economic softness.
Alaska Air Group Inc.'s unit revenue declined by 4.4% year-over-year, an improvement over a 6.4% decline in the second quarter. The Seattle-based parent of Alaska Airlines said total revenue was up 3% to US$1.57 billion.
The company said it is "fully focused" on completing its planned, US$2.6 billion merger with Virgin America Inc. The transaction remains under scrutiny by the Justice Department, and the review was extended. Alaska hopes to get Justice Department approval in the next couple of weeks. While the timeline has slipped, Brad Tilden, Alaska's CEO, said on an earnings call that the remaining issues with antitrust regulators are "manageable."
Mr. Tilden said Alaska is "confident" the deal will get done, and it has the financing in place to make the acquisition. Alaska said Thursday it has raised US$1.5 billion in funding in preparation. In the September period, Alaska said it accrued US$22 million in merger-related special items. Mr. Tilden said Alaska is "pushing" on issues that are important to the deal contours.
American, based in Fort Worth, Texas, said its third-quarter unit revenue fell less steeply than its largest peers and actually was positive in the month of September for the first time since November 2014. "The trend is good and appears to be continuing," Doug Parker, American's chief executive, said on an investor call Thursday.
To boost unit revenue, cope with higher fuel prices and size its offerings for the historically weak fourth quarter, American trimmed its capacity to flat year-over-year in the period. American's capacity across the Atlantic, an area of poor performance for the entire industry, will be down 6% year over year, said Don Casey, American's revenue-management chief.
American earned US$737 million, or US$1.40 a share, on revenue of US$10.6 billion. A year ago, it earned US$1.7 billion, or US$2.49 a share, on revenue of US$10.7 billion. Analysts anticipated revenue of US$10.54 billion. Excluding one-time items, earnings in the latest period were US$933 million, or US$1.76 a share, beating Wall Street expectations. Excluding items as well as a noncash income tax provision, the company said it earned US$2.80 a share. American took a mostly noncash income tax provision of US$452 million in the third quarter, after taking no such provision a year earlier.
Alaska, the sixth-largest airline by traffic, said it earned US$256 million, or US$2.07 a share, down from US$274 million, or US$2.14 a share. Excluding items, the results beat Wall Street forecasts.
