American, Southwest profits rise even as 737 MAX impact swells

Credit: REUTERS/© Lucy Nicholson / Reuters

By Tracy Rucinski and Sanjana Shivdas

Oct 24 (Reuters) - American Airlines Group AAL.O and Southwest Airlines LUV.N posted quarterly profit rises on Thursday even as the two U.S. carriers pointed to rising impact from the continued grounding of Boeing 737 MAX.

Both companies said they remained in negotiations with Boeing Co BA.N over compensation for the 737 MAX grounding, now in its eighth month following two deadly crashes in Indonesia and Ethiopia that together killed 346 people.

"We're working to ensure that Boeing shareholders bear the cost of Boeing's failures, not American Airlines' shareholders," American Chief Executive Doug Parker said on a conference call.

American shares rose 2% to $28.85 and Southwest shares were up 4.7% at $55.72.

Both airlines have been forced to cancel more than 100 daily flights into early next year as Boeing works on software and training updates to win regulatory approval for the planes to fly again.

American trimmed the top end of its adjusted 2019 forecast at $5.50 per share versus its previous forecast range of $4.50 to $6 per share and raised the estimated costs related to the MAX grounding to $540 million for the year.

Southwest did not provide a full-year profit forecast but said it took a $210-million hit to operating income in the quarter from the ongoing MAX safety ban.

But with slimmer fleets and fewer seats to sell, both airlines have been able to charge higher fares thanks to robust U.S. travel demand.

Closely-watched revenues per available seat mile, or unit revenues, rose 4.2% in the quarter at Southwest, which primarily flies domestically, while total unit revenues at American, with a larger international presence, rose 2%.

American's net income rose to $425 million, or 96 cents per share, in the third quarter ended Sept. 30 from $372 million, or 81 cents per share, a year earlier, while total operating revenue rose 3% to $11.91 billion.

At Southwest, net income rose to $659 million, or $1.23 per share from $615 million, or $1.08 per share, a year earlier on a 1.1% rise in operating revenue to $5.64 billion.

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(Reporting by Sanjana Shivdas in Bengaluru and Tracy Rucinski in Chicago; Editing by Anil D'Silva and Nick Zieminski)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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