American bullish on demand after strong Q1

Washington DC
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American Airlines sees strong demand “across all geographies” as it heads into the peak summer season, says president Scott Kirby.

Passenger unit revenues are expected to increase by 4% to 6% systemwide, he says during an earnings call on 24 April. Domestic will lead international in terms of revenue growth, he adds.

Passenger revenue per available seat mile (PRASM) rose 2.9% to 13.67 cents during the first quarter.

Costs per available seat mile (CASM) excluding fuel and special are expected to rise 1% to 3% in both the second quarter and full year, says Derek Kerr, chief financial officer of American.

CASM rose 3.7% to 9.76 cents during the first quarter.

American anticipates an average price of fuel of $3.03 to $3.08 per gallon in the second quarter and $3.04 to $3.09 per gallon in 2014, says Kerr.

The unit revenue growth comes as American is slowing its capacity growth for the year. It now anticipates a roughly 3% mainline available seat miles (ASM) increase in 2014, says Kerr. This is the result of cancelling unprofitable routes, for example Charlotte-Rio de Janeiro, and shortening some seasonal services by moving end dates up a month or two, he says.

The carrier had previously expected a roughly 3.5% increase in mainline capacity during the year.

American plans to add four Airbus A319s, eight Airbus A321s, two Airbus A330-200s, five Boeing 737-800s and two Boeing 777-300ERs to its mainline fleet in the second quarter, according to its latest fleet plan. It plans to remove five 737-400s, 13 Boeing 757-200s and seven Boeing 767-200ERs.

Pre-tax margin is expected to increase by about 400bp to between 10% and 12% in the second quarter compared to a year earlier, says Kerr.