American Airlines expects to gain more sway over ticket prices this quarter, giving hope to an anxious industry that fares are stabilizing and will keep improving.
Passenger revenue for each seat flown a mile should rise 2.5 percent to 4.5 percent from a year earlier as business and leisure travel increase, the world’s largest carrier, which is based in Fort Worth, said in an earnings statement Thursday. The benchmark figure, known as unit revenue, has climbed for four straight periods at American, even after hurricanes forced the cancellation of 8,000 flights in the third quarter.
“The outlook calls for an improving revenue environment,” Helane Becker, a Cowen & Co. analyst, said in a note. “Management has consistently said they expect sequential improvement in unit revenue from 3Q17, while investors were skeptical.”
Coming after a similar forecast from Delta Air Lines Inc., American’s outlook should help quell industry anxiety about a fare war that erupted earlier this year. United Continental Holdings Inc. caused concern this month when it said the battle had expanded to more markets and driven down some so-called walk-up fares around the industry. Such tickets usually are purchased for business travel and typically are among the most expensive.
American climbed 3.7 percent to $52.88 at 9:37 a.m. in New York. The shares gained 9.3 percent this year through Wednesday, while a Standard & Poor’s index of airline stocks advanced 2.1 percent.
Third-quarter adjusted earnings fell to $1.42 a share. Analysts had predicted $1.40, according to the average of estimates compiled by Bloomberg. Revenue rose 2.7 percent to $10.9 billion, matching analysts’ expectations. Unit revenue increased 1.1 percent from a year earlier.
An unexpected increase in average fare per mile helped offset $75 million in reduced earnings from three hurricanes that slowed travel in Texas, Florida and the Caribbean, the Fort Worth, Texas-based airline said earlier this month. That was the first time that the measurement, known as yield, had improved since the start of summer and boded well for prices toward year end.
Yield grew in every region last quarter for the first time since 2014, the airline said.
Racial discrimination complaints
American Airlines passengers have filed 29 complaints of racial discrimination in the last 20 months, the most of any airline flying in the U.S., according to data compiled by the U.S. Department of Transportation.
While air travelers are often unhappy, American’s treatment of African-American passengers has recently come under particular scrutiny. The National Association for the Advancement of Colored People on Tuesday issued a “travel advisory” for the airline, citing four incidents that, it says, “suggest a corporate culture of racial insensitivity and possible racial bias.” Some Twitter users have also been critical of experiences with American, using the hashtags Happened2MeOnAA and FlyingWhileBlack.
On a quarterly conference call with investors Thursday, American CEO Doug Parker addressed the NAACP’s announcement and reiterated the company’s commitment to diversity. “Discrimination, exclusion and unconscious biases are enormous problems that no one has mastered, and we would never suggest that we have it all figured out either,” Parker said. “We want to keep learning and we want to be even better.”