When American Airlines’ CEO Doug Parker [in]famously boasted that AA would never lose money again, he likely never imagined that an entire aircraft type would be grounded for months as oil prices rose. But welcome to 2019…
Put together, the grounding of the Boeing 737 MAX 8 and the increasing cost of fuel and American Airlines expects a $1 billion impact on the company this year. Higher fuel prices will add $650 million in additional spending while the MAX grounding will deplete about $350 million from profit.
AA has a fleet of 24 737 MAX aircraft and has canceled around 1,200 flights so far. That’s just a fraction of the 15,000 MAX flights that American has had to retool as it reworks its busy summer schedule. The changes have forced AA to rebook nearly 700,000 passengers.
Not that this alone will mean loss instead of profit for AA. The carrier still expects a year-end profit despite the drag from rising fuel costs and the 737 MAX problem. In fact, CEO Doug Parker recently pointed to record Q1 revenue:
We want to thank our 130,000 team members for the outstanding job they did to take care of our customers, despite the challenges with our fleet during the quarter. Their hard work led American to record revenue performance under difficult operating conditions.
CONCLUSION
American Airlines will still report likely profit in 2019, but the news is a reminder of how volatile the airline business is. While it may not be in 2019, one day Parker will need to his “forever profitable” words…
> Read More: Doug “Nostradamus” Parker: AA will Never Lose Money Again
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