American Airlines tops first-quarter profit views; unveils pay hike

American Airlines tops first-quarter profit views; unveils pay hike

American Airlines is offering mid-term pay raises to its pilots and flight attendants so they are compensated in line with their peers at Delta Air Lines and United Airlines - a voluntary move nearly unprecedented in USA airline labor history.

American is in contract negotiations with its mechanics and ground workers union groups, but the company implemented pay raises for those employees in September. Assuming they approve the increases, pilots and flight attendants will receive additional pay totaling close to $1 billion over three years.

American Airlines said its first-quarter earnings fell 67 percent as higher costs, including labor and fuel, offset a positive trend in airfares.

American began considering the pay change last fall, after new labor agreements at Delta and United were adopted sooner than expected, said Elise Eberwein, American's executive vice president for people and communications. "Shareholders get leftovers", wrote Citi analyst Kevin Crissey in a note to clients.

The company's shares slumped $2.95, or 6.4 percent, in morning trading.

However, investors' concerns may mount as the airline copes with rising fuel prices and labor costs, in addition to how it responds to sector-wide criticism of deteriorating customer service.

"This is good news and an important step to a culture change and rebuilding the trust at American Airlines", Captain Dan Carey, the APA president, said in a statement. The sharp drop came even though the carrier reported strong earnings for the first quarter. United, Delta and Southwest all predict an increase in the revenue measures, known as PRASM, for the current quarter. The flight attendants' union recently lost an arbitration in which they argued a recent raise should have been 8.2 percent.

The salary increases will cost American $230 million for 2017 and $350 million for 2018 and 2019, according to a company filing.

American CEO Doug Parker said, as he did repeatedly both before and afterward, that revenue and financial performance correlates with employee morale. Jamie Baker of Morgan Stanley downgraded American shares to "neutral" from "overweight", saying the pay decision "establishes a worrying precedent, in our view, both for American and the industry".

American's net income was $234 million, or 46 cents per share, down from $700 million, or $1.14 per share a year earlier.

The Fort Worth, TX-based airline carrier reported Q1 earnings per share (EPS) of $0.61, which was $0.04 better than the Wall Street consensus estimate of $0.57.

The world's largest airline posted revenue of $9.62 billion in the period, up 2 percent and in line with Street forecasts. Get twice-daily updates on what the St. Louis business community is talking about.

Make it your business.

Share

Related News

  • Bell Helicopter teams with Uber to create flying electric taxis

    Bell Helicopter teams with Uber to create flying electric taxis

    And Chargepoint , the largest operator of electric-vehicle charging stations, will figure out how to top off the batteries. Uber hopes to debut its network of flying cars at the 2020 World Expo in Dubai and have "full-scale operations by 2023".
    AAP pays tribute to CRPF troopers killed in Maoist attack

    AAP pays tribute to CRPF troopers killed in Maoist attack

    Survivors of the Naxal attack said that there were almost 300 rebels, including women cadres. The minister said everyone should come together and condemn the Maoist philosophy.
    Jefferies & Co reiterated John Wood Group PLC (ADR) (LON:WG) as 'Underperform'

    Jefferies & Co reiterated John Wood Group PLC (ADR) (LON:WG) as 'Underperform'

    Eight equities research analysts have rated the stock with a hold rating and one has assigned a buy rating to the company. The firm owned 39,315 shares of the financial services provider's stock after selling 1,570 shares during the period.
  • Ivanka Trump hears groans as she defends father in Berlin

    Ivanka Trump talks to a trainee when visiting the Siemens Technik Akademie after she participated in the W20 Summit in Berlin, Germany .
    Google Maps to remind parking locations on Android and iOS

    Google Maps to remind parking locations on Android and iOS

    Google said Wednesday that Google Maps now supports saving auto parking information so drivers can more easily find their cars. Google has officially added a new feature to its popular Maps application that will keep track of where you parked.

    World's last male rhino getting help from Tinder dating app

    The funds raised will go towards ongoing research into Assisted Reproductive Techniques (ART) by a consortium of institutions. Northern white rhino horns are sold by poachers for $50,000 (£39,000) per kilo, which makes them more valuable than gold.
  • Marleau would like to stay in San Jose

    Thornton's wrist shot leaked through Oilers goalie Cam Talbot and dribbled to the goal line, where Marleau stuffed it in. Both of them were solid and skated effectively, and took their time with the puck to ensure two goals for Edmonton.
    Jeff Goldblum cast in 'Jurassic World' sequel

    Jeff Goldblum cast in 'Jurassic World' sequel

    Hit the jump for more details on the Jeff Goldblum Jurassic World 2 casting. "They're doing spectacularly well without me". Ian Malcolm would go back to Jurassic Park , Jurassic World, or Jurassic just-about-anything.
    US FCC to launch 'comprehensive review' of media regulations

    US FCC to launch 'comprehensive review' of media regulations

    John Oliver also dedicated a show segment to the topic, which raised awareness of an otherwise jargon-y, abstract issue. And he has floated the idea privately to various companies and groups that could be affected by that change in policy.
  • See What the Power of Project Scorpio Does to a Beetle

    How these new consoles play in the market over the next few years could reshape the nature of console cycles themselves. According to them, the Xbox Scorpio could have some major problems when the holiday 2017 release date rolls around.
    Severe Thunderstorms Drop Hail in South Dallas Wednesday Morning

    Severe Thunderstorms Drop Hail in South Dallas Wednesday Morning

    To get severe weather alerts to your cell phone via text message, please visit www.wbrc.com/alerts to subscribe. A north northwest wind of 11 to 16 miles per hour will gust as high as 25 miles per hour .

    Target teams with Nintendo for 'Mario Kart' shopping carts

    If your kids are big Splatoon fans, they'll be delighted to take an ink-filled spin through Urchin Underpass in Battle Mode. But what makes the Deluxe version so good is "how unbelievably flawless it is for portable play on the Nintendo Switch ".