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Earnings

American Airlines’ earnings top estimates, but costs from Boeing 737 Max grounding grow

American Airlines‘ third-quarter earnings came in slightly ahead of Wall Street estimates, but revenues just missed forecasts and the financial impact from the Boeing 737 Max grounding continued to grow.

The quarter was challenging for the Fort Worth-based airline. In addition to the Max grounding, the airline suffered operational problems that have forced its customer service team to call travelers to apologize and offer compensation such as frequent flyer miles for the disruptions.

The airline has accused the unions representing its mechanics of an intentional slowdown to gain leverage in contact talks, accusations the unions have denied.

American’s net income rose more than 14% to $425 million from a year ago on revenue of $11.91 billion, which was slightly lower than estimates.

American slightly lowered its full-year earnings forecast by 50 cents at the top end to a forecast range of $4.50 and $5.50. Its shares were down less than 1% in premarket trading.

The quarter’s “results should have been better,” CEO Doug Parker said in an earnings release. “Our third quarter was impacted by the continued grounding of the Boeing 737 MAX and the operational challenges resulting from ongoing labor contract negotiations. These challenges affected our customers, our shareholders and our team members, who we thank for their hard work and perseverance.”

Adjusted earnings per share came in at $1.42, above the $1.40 analysts expected.

The airline said it expects the Max grounding, now in its eighth month, will cost it about $540 million in pretax income this year. In July, the carrier forecast a $400 million hit to pretax earnings this year because of the grounding.

American removed the Max planes from its schedules until mid-January as regulators haven’t yet signed off on Boeing’s fixes to the troubled jets.

Regulators grounded the planes worldwide after two fatal crashes — one in Indonesia in October 2018 and another, less than five months later, in Ethiopia. Regulators haven’t said when they will allow the jets to fly again. They haven’t yet approved software changes Boeing made for the planes after a flight control system was implicated in both crashes.

An American Airlines Boeing 737 Max 8 arriving from Washington’s Ronald Reagan National Airport is seen taxiing to its gate at the Miami International Airport on March 12, 2019 in Miami, Florida.

Joe Raedle | Getty Images

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