With first-quarter 2015 profit up significantly year over
year but revenue down, American Airlines joined the two other largest U.S.
carriers in scaling back capacity growth plans for the year.
AA on Friday reported first-quarter net income of $932
million, almost double its net income in the first quarter of 2014. Operating
revenue, however, declined 1.7 percent year over year to $9.8 billion,
including a 3.7 percent drop in mainline passenger revenue. Operating expenses
declined 7.1 percent year over year, largely spurred by a 43 percent drop in
fuel costs and related taxes.
Passenger revenue per available seat mile during the quarter
declined 1.4 percent and was down 1 percent on domestic routes, 6.2 percent on routes
between Latin American destinations and 6.9 percent on transpacific routes,
though it increased 3.4 percent on transatlantic routes. AA president Scott
Kirby projected that year-over-year PRASM during the second quarter would
decline across “all regions of the world.”
That dip does not owe primarily to a decline in demand,
Kirby said, but to other factors like increased competitive capacity, currency
fluctuations and lower fuel surcharges.
“While we never like to see negative PRASM, we believe
demand remains fundamentally strong in almost all areas of the world, with the
exceptions of Brazil and Venezuela,” Kirby said. “Currency and surcharge
changes mask some of that core demand strength, and high single-digit capacity
growth in all regions pressures otherwise growing demand that, while healthy,
is not growing as fast as capacity.”
Kirby added that corporate demand “in total is strong.”
With that outlook, AA lowered its capacity plans for 2015 by
half a percentage point and now expects that 2015 capacity will increase 2
percent year over year, CFO Derek Kerr said. For the full year, domestic
capacity should increase between 2 percent and 3 percent and international
capacity will increase 1 percent, he said. Citing similar challenges, Delta Air Lines and United Airlines, while also reporting strong earnings
for the quarter, each recently announced plans to reduce capacity growth.
This marks the fourth quarter in a row in which AA has
scaled back international capacity plans, Kirby added.
AA’s total consolidated capacity during the first quarter declined 0.9 percent year over year, and traffic declined 1.4 percent; as such, passenger load factor declined 0.4 percentage points to 79.9 percent. Yield declined 1.2 percent year over year.