FORT WORTH, Texas — The fuel bill at American Airlines fell by nearly half in the first quarter, helping the company set a record profit despite a dip in revenue.
The combination of cheaper fuel and steady demand for flights within the U.S. is boosting all the major domestic airlines, with American joining Delta, United and Southwest in posting sharply higher earnings.
American Airlines Group Inc. said Friday that net income was $932 million, nearly double last year's $480 million, the previous record for the quarter.
The record profit, however, was less than the company's $1.36 billion savings on fuel, compared with a year earlier.
And that captures the challenge that American and other airlines will face later this year: How will they keep boosting profits in the third and fourth quarters, when their results will be compared with the falling fuel prices of late 2014?
American's president, Scott Kirby, said the airline must increase revenue for every seat it flies one mile, a figure known in the industry by the acronym RASM.
"We will have to get to a world where RASM is growing, and I hope that will be the case," Kirby said on a conference call with analysts and reporters. "There are all kinds of things we do to try to manage the business ... and try to increase revenues."
Revenue fell nearly 2 percent in the first quarter to $9.83 billion. The per-mile statistic cited by Kirby fell at a similar rate, and American predicted it will decline even more sharply in the second quarter, by between 4 percent and 6 percent. The company blamed new flights added by competitors, which tends to lead to cutting fares; the strong U.S. dollar, which reduced international ticket sales; and weakness in Latin America.
But expenses fell 7 percent thanks to the nosedive in oil prices that began last summer. Spending on fuel at American, US Airways and their regional airlines including American Eagle dropped 42 percent to $1.86 billion. In a break from recent quarters, the Fort Worth-based company spent more on labor than fuel.
The company's adjusted profit was $1.73 per share, which topped Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was $1.70 per share. Adjusted profit excludes one-time expenses, which were mostly costs tied to combining American with US Airways after their December 2013 merger.
The big airlines have held on to most of the fuel savings. They haven't shared the bounty with passengers through lower fares because travel demand has remained steady and most planes are nearly full at current ticket prices.
American Airlines Group $1.69, or 3.3 percent, to $53.14 in morning trading Friday. They began the day down 4 percent since the start of the year after gaining 112 percent in 2014.
David Koenig can be reached at http://twitter.com/airlinewriter