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American's profit nearly doubles

Friday, July 24, 2015 - 01:12

A huge drop in fuel costs drove quarterly profit to a record high at the U.S.' largest airline, offsetting a fall in revenue. Fred Katayama reports.

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Quarterly profit nearly doubled at American Airlines to a record of $1.7 billion. Driving those earnings: a huge drop in fuel costs. Those significantly lower expenses helped the U.S.' largest airline offset a drop in revenue caused by severe pricing competition with Southwest and weakness in some international markets. American announced that it'll buy back $2 billion worth of additional shares by the end of next year. Stifel Nicolaus analyst Joseph DeNardi said, "Assuming the fuel price environment remains stable, we suspect that could be accelerated." But American's shares, which have fallen more than 20 percent this year, dropped at the start of trading. Its president said in an investors call that passenger revenue will keep falling until the second half of next year. Airline stocks have come under pressure as investors worry that the carriers benefiting from cheap fuel will revert to their bad habit of aggressively boosting capacity and oversupplying the market. But American cut its capacity growth forecast for 2015 earlier this month. That comes as the airlines face a Justice Department probe into whether they're coordinating pricing.

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