American Airlines cites rising fuel costs for cut to margin outlook

American Airlines lowered its forecast for first-quarter profit margins due to the recent rise in oil prices and its shares fell 3 per cent.

The carrier said it expected a pretax margin of 12 per cent to 14 per cent, down from its earlier forecast of 13 per cent to 15 per cent. The estimates exclude special items.

Global oil prices have risen more than 21 per cent in the past two weeks, pushing estimated fuel costs for the quarter to between $1.81 and $1.86 per gallon, up from American Airlines’ prior forecast of $1.71 to $1.76. Still, airlines are poised to spend hundreds of millions of dollars less in fuel costs than they did last year because global oil prices are down nearly 50 per cent since June. Fuel typically is an airline’s largest variable cost, representing a third or more of operating expenses.

– (Reuters)