American Airlines beats profit estimate as fuel prices drop

American Airlines Group Inc.’s fourth-quarter profit exceeded analysts’ expectations on plummeting jet fuel prices and strong domestic travel.

Adjusted earnings rose to $2 a share, compared with the $1.97 average from 15 analyst estimates compiled by Bloomberg. Sales dropped 5.2 percent to $9.63 billion, missing the $9.65 billion expected by analysts.

American operates its second-largest hub at Charlotte Douglas International Airportl, where it is the largest carrier by far.

The world’s largest airline benefited more than rivals from the drop in jet fuel prices because it didn’t lock in rates in advance. That practice, known as hedging, forced carriers including Delta Air Lines Inc. and Southwest Airlines Co. to pay above-market rates for fuel as the average spot price in New York dropped 50 percent in the fourth quarter from a year earlier.

American adopted the non-hedging policy of merger partner US Airways when the carriers combined in December 2013, shutting out its final contract the next year.

Shares rose 2 percent to $38.90 in premarket trading.

Fourth-quarter adjusted profit advanced to $1.29 billion from $1.1 billion a year earlier. The latest figure excluded a $3 billion noncash benefit related to the reversal of a tax valuation allowance, a $592 million charge to write off Venezuelan currency held by the airline and $450 million of merger-related costs.

American’s decision to match ticket prices offered by discounters helped erode revenue as its average fare per mile declined 8.9 percent.

This story was originally published January 29, 2016 at 8:47 AM with the headline "American Airlines beats profit estimate as fuel prices drop."