American Airlines Cuts Outlook After 737 Max Costs Rise to $540 Million

(Bloomberg) -- American Airlines Group Inc. pared its full-year outlook after profit was hurt by the extended grounding of the Boeing Co. 737 Max jetliner and a worker slowdown that snarled summer flight operations.

• Adjusted earnings in 2019 will be no more than $5.50 a share, down from the previous estimate of as much as $6, American said in an earnings statement Thursday. Analysts had expected $4.99, based on an average of estimates compiled by Bloomberg. Additional coverage.

Key Insights

• The prolonged grounding of the Max is now seen as shaving $540 million from American’s 2019 pretax income. The airline has 24 Max jets and expects to resume flights on Jan. 16, provided U.S. aviation regulators approve safety changes made by Boeing to the plane.
• One big bright spot for American and its peers is the strength in domestic travel demand, which will help airlines raise fares while capacity remains constrained. JetBlue Airways Corp. jumped the most in three years this week after predicting higher fares in 2020.
• American is recovering from a mechanics union work slowdown during the summer. The carrier said on-time performance in September was the best in almost two years and the improvement has continued into October.

Market Reaction

• American fell less than 1% to $28.19 before the start of regular trading in New York. The shares slid 12% this year through Wednesday, the worst performance in a Standard & Poor’s index of the five largest U.S. carriers, which increased 7.2%.

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• Third-quarter adjusted earnings rose to $1.42 a share, topping the average analyst estimate of $1.40. Revenue climbed 3% to $11.9 billion, in line with expectations.
• 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, Susan Warren, Tony Robinson

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