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Lower revenue hurts American Airlines

Associated Press logo Associated Press 20/10/2016 David Koenig

More empty seats and higher labor costs are cutting into profit at American Airlines.

But in an encouraging sign for airlines and their investors - and a worrisome one for passengers - American is offering new evidence that higher fares could be just around the corner.

The world's biggest carrier reported on Thursday that third-quarter earnings fell 56 per cent and would have dropped even more if it weren't for continuing low fuel prices.

The company earned $US737 million ($A966 million), down from $US1.69 billion a year earlier. Revenue slipped 1 per cent but costs rose 5 per cent.

American doesn't disclose the average fare that passengers pay, but it apparently declined less than 1 per cent. Another key figure, revenue for every seat flown one mile, fell 3.3 percent, partly due to lower fares but mostly because the average flight was less full - about three to seven more empty seats on average - than during the northern summer 2015.

The decline in that money-per-seat figure, called unit revenue, was less severe than at Delta or United and was the smallest recorded at American since the first quarter of last year.

Translation: Airfares have been falling for two years, but they may be about to rise as airlines scale back their growth plans and limit the supply of seats. American plans to grow just 1 per cent next year, less than half its expansion pace in the first nine months of this year.

CEO Doug Parker said while revenue was down again in the third quarter, "we are encouraged by the trends."

American got a break again on fuel prices, although not as big as in recent quarters. The airline and its regional subsidiaries spent 11 per cent less on fuel than they did in the third quarter of 2015.

Labor costs jumped 15 percent, however, as union workers won pay raises to make up for years of lower wages after the industry downturn in the previous decade.

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