American Airlines CEO: We’ll never lose money again
The CEO of American Airlines says the once-volatile industry has changed so radically that his company will never lose money again. Even in a bad year, Doug Parker says, the world’s biggest airline should earn about $3 billion in profit before taxes. Parker made the declaration at a meeting with analysts and reporters on Thursday. From 1978 through 2013, American’s cumulative profit was $1 billion. By the end of this year, Parker says, the airline will have earned $19.2 billion in pretax income in the last four years.
Airlines have benefited in that span from lower fuel prices, higher revenue from fees, and less competition because of mergers. American, Delta, United and Southwest control more than 80 percent of the U.S. air-travel market. “I don’t think we’re ever going to lose money again,” Parker said. “We have an industry that’s going to be profitable in good and bad times.” Parker admitted it was sometimes difficult to sell that optimism. Many analysts want to see how the airlines fare in a recession. There also is concern that the carriers are growing too rapidly, driving down fares. And if oil prices rise, the airlines would face another spike in fuel expense.
Airlines are also subject to unforeseen events from terrorist attacks to natural disasters that can hurt the public’s demand to travel. Earlier this month, American lowered its third-quarter revenue forecast after Hurricane Irma led the carrier to cancel a large number of flights in Florida for several days. At Thursday’s conference, American detailed a plan to increase revenue by $3.9 billion over the next four years through new deals with credit card companies, more seats on planes, and other measures.
On another subject, Parker said American has no plans to shrink the space between rows — called pitch — under 30 inches. The airline had planned to crowd some rows on new Boeing 737s 29 inches apart, but changed course after unfavorable publicity and complaints from flight attendants who worried about dealing with cramped and hostile passengers. Shares of Fort Worth, Texas-based American Airlines Group Inc. were up 57 cents to $47.42 in afternoon trading.