April 26, 2018 / 11:45 AM / a year ago

Fuel costs weigh on American Airlines' profit, shares fall

NEW YORK, April 26 (Reuters) - Shares of American Airlines Group Inc fell more than 5 percent on Thursday as sharply higher fuel costs weighed on profits and spooked investors.

The Fort Worth, Texas-based carrier reported net profit of $186 million, or 39 cents share, in the first quarter, down from $340 million, or 67 cents a share, a year ago.

Excluding items, American earned 75 cents a share, 3 cents above average analyst forecasts.

Fuel expenses jumped 25.7 percent in the quarter.

“Higher fuel prices led to a decline in year-over-year earnings, but we are excited about the future,” American Airlines Chief Executive Doug Parker said in a statement.

Shares were trading at $42.95, extending a 17-percent year-to-date decline.

Rising costs are an ongoing concern for airlines, as high fuel prices and rich bumps in salaries and benefits for pilots, flight attendants and mechanics have swelled operating expenses.

This has put a damper on what could have been an otherwise rosy operating environment for American. Robust demand for air travel drove a 5.9-percent year-over-year increase in quarterly total revenue to a record $10.4 billion.

American said enhancements to its fleet, notably an order of 47 Boeing 787s, will help improve fuel efficiency and lower maintenance costs, saving the carrier money down the line.

Referring to the spike in fuel expenses, American lowered its full-year earnings forecast to between $5 and $6 per share, from between $5.50 and $6.50.

American said it expects second-quarter unit costs, excluding fuel and special items, to rise 3.5 percent due to employee and benefit increases and other costs.

The Dow Jones U.S. Airlines Index was down 2.7 percent on Thursday, and has lost 11 percent this year, on results from American and rival Southwest Airlines.

Reporting by Alana Wise Editing by Nick Zieminski

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