American stock sinks as carrier expects $350 million fallout from 737 Max groundings - CNBC

American Airlines stock sank in premarket trading Friday after the carrier lowered its earnings forecast for the year, citing a major financial hit from the ongoing grounding of Boeing's 737 Max jets and higher fuel prices.

The carrier expects a hit to pretax earnings of $350 million after grounding its Max fleet and canceling thousands of flights through August. American also expects 2019 adjusted profit to be between $4 and $6 per share.

Shares fell more than 3% before the market's open.

Here's what the airline reported, versus average analysts estimates compiled by Refinitiv:

• Adjusted earnings: 52 cents vs 51 cents per share forecast
• Revenue: $10.58 billion vs $10.59 billion forecast

The carrier also raised its 2019 fuel cost guidance by $650 million in the face of higher oil prices.

American has grounded its 24 Boeing 737 Max jets through August after the anti-stall software was identified as problematic in two fatal crashes in Ethiopia and Indonesia. The roughly 155 canceled flights a day comprise 1.5% of its total capacity per day in the summer.

American said that first-quarter net income rose to $185 million, or 41 cents per share, from $159 million, or 34 cents a share, a year earlier. Excluding items, American earned 52 cents a share, topping analyst estimates by a penny.

Revenue rose 1.8% to $10.58 billion from $10.4 billion a year earlier, slightly missing analyst estimates.

Revenue per available seat mile, a key industry metric, rose by 0.5% to 15.87 cents on a 1.3% increase in total available seat miles. Excluding fuel and special items, cost per available seat mile was 11.88 cents, up 2.7% year-over-year, by a higher volume of heavy maintenance checks.

"As we look forward to 2020 and beyond, we anticipate that our free cash flow production will increase significantly as our historic fleet replacement program winds down. We are very bullish on our future and focused on creating value for our shareholders," said Chairman and CEO Doug Parker.

It's unclear when the Max, which has been grounded since mid-March, will return. Several major airlines have canceled thousands of flights through the summer. Boeing has stopped all deliveries and cut production by 20%, and said it's completed 96 flights totaling over 159 hours of air time with the new Max software fix.

Southwest on Thursday reported that the Max groundings, as well as the U.S. government shutdown and some maintenance issues, collectively cost the airline more than $200 million in revenue.

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April 26, 2019 at 07:24PM