American Profit Surges, Launches Bare-Bones Airfares

American Airlines reported third quarter earnings up 80 percent to USD$1.7 billion, on lower fuel prices.

American said passenger revenue, as a percentage of capacity, will fall by between 5 and 7 percent in the current quarter from a year ago. The measure fell 6.8 percent in the third quarter.

The company said it expects pre-tax profit margin between 12 and 14 percent in the fourth quarter, up from 10.6 percent a year earlier.

For 2016, American plans to grow service 2 to 3 percent.

BARE BONES

American Airlines also said it will roll out bare-bones fares in 2016, matching competitors' prices on any non-stop route.

The airline's move to sell cheap fares with more restrictions highlights how competition is intensifying between the largest US airlines and low-cost rivals, such as Spirit Airlines and Southwest Airlines.

About 87 percent of American's customers flew the airline just once last year, comprising more than 50 percent of revenue, according to Kirby. He said these are customers "for whom air travel is largely a commodity," meaning they will switch to a competitor if American charges more per ticket.

Starting in 2014, Southwest and Spirit have ramped up service from two of American's hubs, Dallas and Chicago, at times exceeding demand and pushing down fares.

The budget phenomenon has mimicked competition in Europe, where low-cost airlines such as Ryanair now carry the most passengers.

Next year American will sell a larger array of tickets that are priced according to certain restrictions, president Scott Kirby said.

The company waited to make the change until retiring the brand and bookings site of subsidiary US Airways, which it did on October 17.