American Airlines matches Wall Street 4Q profit forecast

FORT WORTH, Texas  – American Airlines’ fourth-quarter profit fell but met Wall Street expectations, and a key measurement of revenue trends rose for the first time since late 2014, further evidence that airlines are finally starting to push average prices higher.

American executives echoed officials at other airlines in reporting that demand for travel has picked up since the November election.

But the airline also reported a 17 percent spike in labor spending after new union contracts, and it warned that costs will rise sharply again in the first quarter.

Shares of American Airlines Group Inc. fell $2.64, or 5.3 percent, to close at $46.95 on Friday.

Separately, American executives said that they would revive a previously rejected bid to work more closely with Australian carrier Qantas. The airlines want to work together on setting prices and schedules, which is forbidden without an exemption from antitrust laws.

The Obama administration rejected immunity for the deal, but airline-industry officials believe that the new Trump administration will be friendlier.

“We are hopeful that the Trump administration will give the Qantas joint venture a second and more favorable look,” said Stephen Johnson, American’s executive vice president.

Johnson added that American, Delta Air Lines and United Airlines are also asking the administration to re-examine whether Middle Eastern carriers Emirates, Qatar Airways and Etihad Airways are violating an open-skies treaty by receiving unfair subsidies from their governments. The Obama administration did not act on the US carriers’ complaints.

At airports around the country, momentum is clearly swinging toward higher fares.

American predicted that total revenue for every seat flown one mile in the first quarter would be 2.5 percent to 4.5 percent higher than in early 2016. That is a more optimistic forecast than rivals have offered, although comparisons can be tricky — American includes some revenue, such as from credit-card deals, that other airlines don’t include.

The same figure rose 1.3 percent in the fourth quarter, the first such increase in so-called unit revenue since the last quarter of 2014, American said.

That trend is not an accident. Airlines have been slowing their growth to tighten the supply of seats and drive up average fares. American said it would add only one percent to passenger-carrying capacity this year.

American is taking other steps to boost revenue. Next month it will start selling “basic economy” tickets designed to win over passengers from discount airlines like Spirit and Frontier.