We Stand Pat on American After Revised Guidance

Countering American’s higher revenue expectations during the quarter are higher average fuel prices. Fuel prices will now fall between $2.28 to $2.33, instead of $2.22 to $2.27, raising American’s fuel expense in our model by $50 million to $100 million. Separately, management maintained projections for costs per available seat mile excluding fuel and special items, showing flat to little growth over the prior-year third quarter. We don’t believe our full-year pretax margin is in jeopardy at over 6%.

To buttress cash flows in the high oil price environment, American will continue trimming capital spend among other measures. Non-aircraft capital expenditures and gross aircraft capital expenditures will finish lower than in third-quarter guidance. American now expects non-aircraft capital expenditures of $470 million (was roughly $500 million) and gross aircraft capital expenditures of $551 million (was $566 million).

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