American Airlines (NASDAQ:AAL) has issued a profit warning for the second quarter, after higher fuel costs weighed.
The U.S-based airline said it expects to earn an adjusted per-share profit of between $4.50 and $5 a share for the year, down from previous April estimares of between $5 and $6.
During the quarter, American said revenue passenger miles rose 1.8 percent, with capacity also increasing 1.5 percent.
Meanwhile, average fuel prices increased 38 percent to $2.23 per gallon across the period.
American Airlines Chairman and CEO Doug Parker said of the quarter:
“This was perhaps the most challenging quarter for the American team since our merger with US Airways in 2013,”
Parker attributed the worse-than-expected performance to a disruptions from a subsidiary, alongside cost pressures relating to rising fuel costs.
“We had an operational disruption at our PSA Airlines subsidiary that was extremely trying for our customers and our team members; higher fuel prices increased our expenses by more than $700 million versus last year; and our revenues, while increasing, have begun to trail the rate of increase at our largest competitors for the first time since early 2016. Because fuel expenses are expected to increase by more than $2 billion this year, we expect 2018 earnings to be lower than last year.”
Looking forward, Parker remained optimistic of the long-term potential of the air carrier.
“These near-term challenges do not dampen our long-term excitement about the future of American Airlines. We are taking aggressive action now to return American to prior profitability levels even at these much higher fuel prices. ”
Detailing the measures taken, Parker noted that American were “deferring aircraft deliveries and capital expenditures, lowering our 2018 capacity growth and reducing non fuel-related expenses.”
The company’s profit warning follows the announcement from European low-cost airline, Ryanair, that 300 jobs may be at risk.
Ryanair announced the move amid cabin crew strikes which had led to the cancellation of some 600 flights.
The airline also noted that higher fuel costs and lower fares had also proved a concern for profits.
American Airlines shares are currently +0.29 percent during pre-trading, as of 14.02PM (GMT).