by Associated Press | October 24, 2019

The grounding of Boeing 737 Max jets is impacting airlines financially in different ways. American Airlines is reporting higher third-quarter profit, but is cutting the upper end of its estimate for full-year earnings as it struggles to respond to the grounding. Southwest Airlines said Thursday that third-quarter profit rose 7 percent on record revenue despite taking a hit from the grounding of its Boeing 737 Max aircraft fleet.

American Airlines said Thursday it expects the grounding of its Max jets to cut full-year pretax earnings by about $540 million. During the three months ending in September, the Max grounding cut pretax income by about $140 million.

Even with the loss of its 24 Max planes and others issues, American earned $425 million during the quarter, up 14 percent, with help from lower fuel prices.

Chairman and CEO Doug Parker said, however, that the results should have been better were it not for the Max grounding and ongoing labor-contract negotiations. American sued its mechanics' unions over what it viewed as an illegal work slowdown that caused some summer flights to be delayed or canceled.

Parker promised that American is "taking decisive action to correct this performance," and spoke in upbeat terms about 2020 and beyond.
For 2019, however, the company narrowed its full-year profit forecast to between $4.50 and $5.50 per share from $4.50 to $6.

Adjusted third-quarter profit was $1.42 per share, topping Wall Street expectations for $1.38, according to Zacks Investment Research.

Revenue was a record $11.91 billion, a sliver shy of expectations.

Lower prices for jet fuel allowed American to cut its fuel bill by $245 million, or 11 percent, compared with a year earlier.

In trading before the opening bell, shares of Fort Worth-based American Airlines Group Inc. were down 29 cents to $28.

CEO Gary Kelly said Southwest is in discussions with Boeing about compensation for damages related to the grounded plane, which has forced the airline to cancel thousands of flights since March.

"We expect the damages to continue to grow into 2020," Kelly said.

Southwest said the grounding cut operating income by $210 million in the third quarter, and $435 million since March.

Southwest had 34 Max jets - more than any other airline - back in March and had expected to receive more by now. Instead, it has removed the Max from its schedule through early February as it waits for Boeing to finish updating the plane and getting approval from federal safety regulators. The airline estimates it will need one to two months for pilot training and other preparations.

Strong travel demand and rising ticket prices helped offset its Boeing issues.

On Thursday, Dallas-based Southwest Airlines Co. reported third-quarter profit of $659 million, or $1.23 per share. That easily topped Wall Street expectations for $1.09, according to a survey by Zacks Investment Research.

Revenue rose 1 percent to $5.64 billion despite a 2.9 percent reduction in passenger-carrying capacity due to the Max grounding. The revenue was in line with analysts' expectations.

The average fare rose 1.7 percent to $155.95. A closely watched figure, revenue for each seat flown one mile, rose about 4 percent. Southwest predicted it will be flat to up 2 percent in the fourth quarter.

Southwest expects that passenger-carrying capacity in the fourth quarter will be as much as 1 percent below the same period last year, an unusual trend at an airline that has grown rapidly through much of its history.

In trading before the market opened Thursday, Southwest shares were up 86 cents, or 1.6 percent, to $54.10.