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American Airlines Posted a Better-Than-Expected Profit

Reports Suggest American Airlines And US Airways Merger ImminentReports Suggest American Airlines And US Airways Merger Imminent
American's Fuel costs dropped 20%.Photograph by Joe Raedle — Getty Images

American Airlines (AAL) reported a better-than-expected quarterly profit as the world’s largest airline benefited from cheaper fuel.

American’s total operating costs fell 3.3% to $8.61 billion in the second quarter, with fuel costs declining 20%.

Net income plunged 44% to $950 million as provisions for income tax surged to $543 million from $15 million.

Excluding items, American’s profit slumped to $1.77 per share from $2.62, but handily beat the average analyst estimate of $1.68, according to Thomson Reuters I/B/E/S.

Total operating revenue declined 4.3% to $10.36 billion in the quarter ended June 30.

 

Airline stocks have fallen in recent months amid growing investor concern that carriers will continue to add flights and push down prices despite insufficient demand, and that rebounding oil prices will add to their fuel costs.

Economic slowdown abroad poses an even greater risk to revenue, with foreigners reluctant to buy tickets on U.S. airlines to visit the United States as the dollar rises in value against other currencies.

Up to Thursday’s close, the stock had fallen more than 17% this year.