American Airlines rode strong demand for flying among the travelling public to higher earnings on Thursday despite mounting costs connected to the prolonged grounding of the Boeing 737 MAX.
Shares of the big US carrier - which vowed to recoup MAX-related losses from Boeing - rallied after the company announced on a conference call that it expects more shareholder distributions in the next couple of years as it exits a period of heavy capital investment to update its plane fleet.
Fuller flights amid a good consumer environment enabled American's profits to soar 14.2 percent higher in the third quarter to $425 million. Revenues increased three percent to $11.9 billion.
Chief Executive Doug Parker said he was pleased with the earnings growth but conceded that "our results should have been better." Parker cited the hit from the MAX grounding - in the wake of two deadly crashes - as well as ongoing operational challenges tied to contentious labor talks with maintenance workers.
American now estimates the MAX grounding will shave pre-tax profits by $540 million in 2019, up from the prior estimate of a $400 million hit to the bottom line.
Parker said the company intends to recover compensation from Boeing for its growing MAX-related costs and to "ensure that Boeing shareholders bear the cost of Boeing's failure, not American's shareholders." Boeing has set aside $4.9 billion for customers harmed by the MAX grounding and indicated that the payments could come in cash or through in-kind contributions in aircraft or services.
Earlier this month, American pushed back the return of the jets until January 2020 based on slower-than-expected recertification of the plane by regulators. The MAX was grounded in March following two crashes that killed 346 people.
Comments
Comments are closed for this article.