American Air Sees Hit to Revenue Gauge on 737, U.S. Shutdown

(Bloomberg) -- American Airlines Group Inc. warned of first-quarter weakness, citing the grounding of its 737 Max fleet last month and the government shutdown early in the year.

• An industry gauge of pricing power will rise no more than 1 percent, the airline said in a statement Tuesday. American previously predicted that the figure, revenue for each seat flown a mile, would be flat to up 2 percent.
• Pretax margin will be 2 percent to 4 percent, American said, reducing each figure by 0.5 percentage point from its earlier forecast as fuel prices rose.

Key Insights

• American’s forecast followed that of Delta Air Lines Inc., which last week cited increased business travel and higher last-minute ticket prices as bolstering first-quarter results.
• The U.S. government shutdown weakened demand as travelers worried about the economic effects and public workers curtailed trips.
• American said it isn’t able to forecast the costs from grounding Boeing Co.’s 737 Max following two fatal crashes. The order has forced American to cancel about 90 flights a day since March 13, or about 1,620 in the first quarter. The airline has scrubbed the Max from schedules through June 5.
• American had to cancel another 940 flights when it was forced to ground 14 Boeing 737-800s to repair improperly installed overhead bins. Three planes were returned to service in March and the rest will resume flights by the end of April.

Market Reaction

• The shares fell 2.7 percent to $33.01 at 9:40 a.m. in New York, leading a Standard & Poor’s airline index lower. American climbed 5.5 percent this year through April 8, compared with an 8.7 percent gain for the index.

Get More

• Additional detail
• Company 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

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