By Jeffrey Dastin
(Reuters) - American Airlines Group Inc (O:AAL) on Friday reported first-quarter profit above analysts' expectations and declared a $0.10 dividend as cheap fuel continued to help its bottom line.
American, the world's largest passenger carrier, earned $932 million last quarter, nearly double its profit a year earlier. Excluding special items, it earned $1.2 billion, or $1.73 per diluted share, compared to analysts' average estimate of $1.71 per diluted share, according to Thomson Reuters I/B/E/S.
Facing markets where travelers' spending power has been hurt by the strong U.S. dollar or the plummeting price of oil, competitors Delta Air Lines Inc (N:DAL) and United Continental Holdings Inc (N:UAL) have said they will shrink parts of their international service outside the peak summer travel season.
Investors have responded favorably to these capacity cuts and are looking to see whether American will offer similar guidance during an investor call on Friday morning.
American said a strong U.S. dollar, competitive capacity growth and economic softness in Latin America caused its revenue to fall 1.7 percent year-over-year to $9.8 billion. Passenger unit revenue declined 1.7 percent, within the range of earlier guidance of a one to three-percent drop.
The Fort Worth-based airline does not hedge fuel so its expenses benefited fully from the oil price decline, and it paid 42.2 percent less for fuel than a year earlier. Unit costs excluding fuel and special charges related to its mainline fleet were up 5.8 percent.
"We continue to believe share repurchases are one of the best ways to use the cash windfall from lower jet fuel," Cowen and Co analyst Helane Becker said in a research note Friday after American said it bought back $190 million of its stock last quarter.
The airline reported a pre-tax profit margin, excluding special items, of 12.7 percent, within the range of earlier guidance.
"All of this puts us on a great track to finish the heavy lift remaining in 2015, including the large task of combining our passenger service systems," Chief Executive Officer Doug Parker told employees in a letter, referring to a step in the integration of American with US Airways, which merged in December 2013.
"This is a big project that involves technology, airport operations, reservations and many, many more parts of the airline, as well as a great deal of training for our employees."
Shares were up more than 1 percent in pre-market trading.