American Airlines says Boeing 737 MAX grounding hit Q2 profits by $185M

NEW YORK, USA – American Airlines said Wednesday, July 10, the grounding of the Boeing 737 MAX  reduced second quarter earnings by $185 million even as the company raised a key revenue benchmark because of strong consumer demand.

American, which has 24 of the MAX planes in its portfolio, previously estimated that the grounding would hit 2019 earnings by $350 million.

The carrier has extended its grounding to September 3 due to uncertainty over when the plane will be returned to service after two deadly crashes.

But shares of American rose 2.4% in early trading to $33.13 after it lifted its outlook for revenue per available seat mile to a gain of 3% to 4% from the prior outlook of 1% to 3%, citing “higher than expected load factor across the system,” according to a securities filing.

Last week, Delta Air Lines described flying demand as “strong,” amid strong economic conditions.

American’s strong financial performance comes in spite of rising consumer ire at an increased number of flight cancellations this summer, due in part to the 737 MAX issue, but also to an ongoing dispute with maintenance workers.

American said in its securities filing that it had initiated litigation against the unions, accusing the groups an “illegal work slowdown.”

“That slowdown has significantly impacted the company’s operation and caused a significant number of flight cancellations and delays in the second quarter,” the company said. – Rappler.com