American Airlines Up, Evidence the Trump Economy is Strong

American Airlines Up, Evidence the Trump Economy is Strong

American Airlines rode strong demand for flying in the traveling public to higher earnings Thursday despite mounting costs connected to the prolonged grounding of the Boeing 737 MAX.

Fuller flights amid a good consumer environment enabled American’s profits to soar 14.2 percent higher in third-quarter to $425 million. Revenues increased three percent to $11.9 billion.

Chief Executive Doug Parker said he was pleased with the earnings growth, but conceded that “our results should have been better.”

Parker cited the hit from the MAX grounding — in the wake of two tragic crashes — as well as ongoing operational challenges tied to contentious labor talks with maintenance workers.

American now estimates the MAX grounding will shave pre-tax profits by $540 million in 2019, up from the prior estimate of a $400 million hit to the bottom line.

Earlier this month, American pushed back the return of the jets until January 2020 based on slower-than-expected recertification of the plane by regulators.

The MAX was grounded in March following two crashes that killed 346 people. On Wednesday, Boeing said it expects to receive approval from some regulators later this year to allow the aircraft back into service.

American now expects 2019 earnings per share of between $4.50 and $5.50, cutting the upper end of the projected range from $6.00 previously.

Southwest Airlines also cited strong consumer demand as it reported higher third-quarter profits on Thursday, despite a big MAX hit.

With its fleet of 34 MAX planes, bigger than American’s or fellow rival United Continental’s, the grounding of the popular aircraft has reduced Southwest’s earnings by $435 million so far in 2019.

And damages are expected to “continue to grow into 2020,” Southwest Chief Executive Gary Kelly said.

“We are engaged in ongoing discussions with Boeing regarding compensation for damages related to the MAX groundings,” Kelly said.

“We have not reached a settlement with Boeing, and no estimated settlement amounts have been included in our third quarter 2019 results.”

Southwest’s net income rose 7.2 percent to $659 million, as revenues increased 1.1 percent to $5.6 billion.

Shares of American fell 0.7 percent to $28.10 in pre-market trading, while Southwest gained 2.0 percent to $54.25.

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S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

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