American Airlines cuts outlook on 737 MAX, sees jets flying again by mid-August

By Sanjana Shivdas and Tracy Rucinski (Reuters) - American Airlines Group Inc cut its 2019 profit forecast on Friday, blaming an estimated $350 million hit from the grounding of Boeing's 737 MAX planes during its busiest travel season, but said it was confident the aircraft would start flying by mid-August. American, the No

Reuters April 27, 2019 00:05:38 IST
American Airlines cuts outlook on 737 MAX, sees jets flying again by mid-August

American Airlines cuts outlook on 737 MAX sees jets flying again by midAugust

By Sanjana Shivdas and Tracy Rucinski

(Reuters) - American Airlines Group Inc cut its 2019 profit forecast on Friday, blaming an estimated $350 million hit from the grounding of Boeing's 737 MAX planes during its busiest travel season, but said it was confident the aircraft would start flying by mid-August.

American, the No. 1 U.S. carrier by passenger traffic, said earlier in April that it was extending the grounding of its twenty-four 737 MAX jetliners until Aug. 19, leading to about 115 daily cancellations during the peak summer travel season.

No. 3 U.S. carrier United Airlines also said it expects to cancel hundreds of flights during the peak summer season due to the groundings.

While the cancellations only represent about 2 percent of American's daily summer flight capacity, the financial impact is disproportionate as revenue during lost while the vast majority of costs remain in place.

The airline said its employees were working overtime to accommodate some 700,000 summer travellers and thousands of crew affected by 15,000 MAX cancellations through Aug. 19.

As a result, Fort Worth, Texas-based American said it now expects its 2019 adjusted profit of $4.00 per share to $6.00 per share, from a previous forecast of between $5.50 per share and $7.50 per share.

Analysts on average were expecting 2019 earnings of $5.63 per share, according to Refinitiv data.

American also said it expects fuel expenses for the year to be about $650 million higher than its earlier forecast, citing a recent run-up in oil prices.

Shares were down 2 percent at $32.77 in morning trading.

IF FAA APPROVES, WE'LL FLY

Following the worldwide grounding in March of the 737 MAX after two fatal crashes, Boeing Co is developing a software fix and new pilot training for regulatory approval.

The U.S. Federal Aviation Administration is under scrutiny for its original certification of the airline and has said it will work with regulators worldwide to recertify the aircraft.

In the event that the FAA approves the 737 MAX before other regulators, American Chief Executive Doug Parker said, "we will absolutely fly the airplane. That's our regulator."

Parker said pilots will play a critical role in helping rebuild public trust in the aircraft, and that his decision to remove the planes from American's schedule through Aug. 19 was based on 95 percent certainty that they would be ready to fly by that date.

United Airlines, which is part of United Continental Holdings Inc, said it expects to cancel about 35 to 40 flights a day during the month of June. In April, it expects cancellations of about 130 flights and 900 in May.

American reported first-quarter net income of $185 million, or 41 cents per share, compared with $159 million, or 34 cents per share, a year earlier.

Excluding items, the airline earned 52 cents per share, compared with the average analyst estimate of 51 cents per share.

Total operating revenue rose 1.8 percent to $10.58 billion.

American said it expects unit revenue, a closely watched performance measure that compares sales with flight capacity, to rise between 1 percent and 3 percent year-on-year in the second quarter.

Southwest Airlines Co, the world's largest MAX operator with 34 jets, said on Thursday it sees unit revenue growing by 5.5 percent to 5.7 percent in the second quarter.

(Reporting by Sanjana Shivdas and Arjun Panchadar in Bengaluru and Tracy Rucinski in Chicago; Editing by James Emmanuel and Steve Orlofsky)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.