American Airlines on Thursday posted better-than-expected fourth-quarter earnings and higher revenue, thanks to strong global demand and last-minute bookings.
The largest U.S. airline reported revenue was $10.6 billion, in line with expectations, and up from $9.8 billion in the last three months of 2016.
In the last three months of 2017, American's revenue for each seat it flies per mile, a key industry metric, increased 5.6 percent compared with same period of 2016, and a 2.5 percent increase in available seat-miles. This was in line with the airline's increased forecast it gave earlier this month.
The airline said it expects first-quarter revenue-per-seat mile to increase by 2 percent to 4 percent over the first three months of 2017.
The airline expects adjusted earnings for 2018 of $5.50 to $6.50 a share. In 2017, American said it took in $4.88 in adjusted per-share earnings.
Net income fell nearly 11 percent to $258 million, or 54 cents per share, on the year. Excluding nonrecurring costs, the airline earned 95 cents per share, topping estimates of 92 cents per share from analysts polled by Thomson Reuters.
Like its competitors, American is grappling with higher fuel costs. The airline said its fuel bill rose some 20 percent in the last quarter from 2016.
In an effort to grow revenue and profits amid margin-crimping cost increases, American and its rivals are segmenting their cabins into smaller classes of service, including no-frills basic economy and premium economy, which offers a larger seat, more leg room and an amenities kit for a higher fare. The airline said it expects the latter to be installed on most of its widebody fleet by the spring of 2019.
American's shares were down more than 3 percent in early trading Thursday. Airline shares fell sharply on Tuesday after United Airlines announced it would aggressively add seats to the market over the next three years, sparking worries of higher costs and a possible fare war.
"Management will likely need to calm some fears about domestic competition, but it's not like they are a stranger to competition," Cowen & Co. said in a note. "American competes with Southwest Airlines in Dallas and Spirit Airlines in Chicago, and has more than held its own. We expect that will continue."