American Air Sees $400 Million Blow to Earnings on Max Grounding

(Bloomberg) -- American Airlines Group Inc. forecast a $400 million drag on this year’s pretax earnings from the grounding of Boeing Co.’s 737 Max jetliner..The impact of the flying ban includes a $175 million blow in the second quarter, American said in a statement Thursday. The world’s largest carrier has removed the beleaguered plane from its schedule through Nov. 2. Southwest Airlines, the biggest operator of the Max, pulled the plane through Jan. 5 earlier Thursday. .Key Insights.American, which has 24 Max jets, is getting a modest silver lining from the grounding, which has given airlines more room to raise fares by cutting the number of seats available. The company said revenue for each seat flown a mile, a gauge of pricing power, would increase 1% to 3% in the current quarter. American had record sales in the second quarter and said demand remains robust. The company raised its 2019 earnings forecast to at least $4.50 a share, from a previous outlook of no less than $4. Delta Air Lines Inc. and United Airlines Holdings Inc. recently raised their 2019 profit forecasts.American said its operations continue to be hobbled by a “significant number of flight cancellations and delays” from what the company has said is a work slowdown by its mechanics union. The labor group hasn’t had a new contract since American merged with US Airways in December 2013. .Market Reaction.American fell 2.1% to $33.85 before the start of trading in New York. The shares climbed 7.7% this year through Wednesday, the worst on a Standard & Poor’s index of the five largest U.S. airlines..Get More.American’s pretax margin excluding certain items increased to 9%. Earnings of $1.82 a share surpassed the $1.80 average of analyst estimates compiled by Bloomberg.Additional coverageCompany statement.To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson.©2019 Bloomberg L.P.

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American Air Sees $400 Million Blow to Earnings on Max Grounding

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