American Airlines sees $400 million pretax hit in 2019 from 737 MAX grounding

[July 25, 2019]    By Tracy Rucinski and Sanjana Shivdas

(Reuters) - American Airlines Group Inc <AAL.O> said on Thursday it expected the Boeing 737 MAX grounding to hit its 2019 pretax earnings by about $400 million, sending shares down about 1%, even as a strong passenger demand lifted quarterly revenues.

Rising bookings have fueled revenue growth for the main U.S. carriers, partially because they have been able to charge passengers more for seats that are in scarcer supply following the worldwide MAX grounding in March after two fatal crashes.

But the lower than planned capacity is also weighing on costs.

American, the second largest U.S. operator of the MAX, has removed its 24 jets from its schedule through early November, leading to about 115 daily cancellations.

To compensate for its reduced fleet and the absence of fresh MAX deliveries, the airline will extend the lifespan of other 737 models as well as some 757s and A320s to help it meet demand.

The No.1 U.S. airline by passenger traffic lifted the lower end of its 2019 adjusted profit forecast to between $4.50 per share and $6 per share, up from a previous range of $4.00 per share to $6.00 per share.

Net income rose 19% to $662 million, or $1.49 per share, in the second quarter ended June 30 from a year earlier.

On an adjusted basis, the airline earned $1.82 per share. Analysts had on average forecast $1.80 per share, according to Refinitiv data.

Total operating revenue rose 3% to $11.96 billion.

(Reporting by Tracy Rucinski and Sanjana Shivdas in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)

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