NEW YORK (Reuters) - American Airlines (AAL.O) on Thursday reported an 11 percent drop in quarterly profit from a year earlier as labor and fuel costs bloated operating expenses, sending shares lower in premarket trading. American, the No. 1 U.S. carrier by passenger traffic, reported fourth-quarter net profit of $258 million, or 54 cents per share, down $31 million from $289 million, or 56 cents a share, a year earlier.
The Fort Worth, Texas-based carrier’s shares were down 1.2 percent in premarket trading.
On an adjusted basis, American earned 95 cents a share, topping analysts’ consensus forecast for 92 cents, according to Thomson Reuters I/B/E/S.
In 2017, American stunned investors by offering its pilots and flight attendants a mid-contract pay increase that is set to cost $350 million each year in both 2018 and in 2019.
As a result, quarterly operating expenses climbed 9.8 percent from a year earlier to $9.9 billion, with a 23.5 percent jump in consolidated fuel expenses and a 7 percent increase in salaries and benefits.
United’s expectation that it would be raising capacity at a clip of between 4 percent and 6 percent each year until 2020 sent sector shares tanking amid concerns of a growing industry airfare war. [L4N1PJ4S4]
In line with its previous guidance, American said it expects its 2018 total system capacity to be up 2.5 percent from a year earlier, though actual capacity growth may be slightly higher following a brutal Atlantic hurricane season last year.
For the current quarter, American forecasts that total unit revenue will grow 2 percent to 4 percent on the year.
Reporting by Alana Wise; Editing by Bernadette Baum