American Airlines reports 44% drop in 2Q profit but meets estimates

American Airlines (AAL) reported a 44% drop in second-quarter earnings Friday as the company drove down operating costs, but a drop in revenue and $543 million in income taxes that it didn’t owe last year took a toll on the bottom line.

The $950 million in net income for April, May and June compared to $1.7 billion for the same period a year earlier.

At $1.68 per diluted share, the results met Wall Street expectations, according to S&P Global Market Intelligence.

The results came on a 4.4% decline in revenues, to nearly $10.4 billion.

But the airline reported cutting the cost to fly each seat a mile by 4.6%, to 11.32 cents. Low fuel costs continued to help American and the industry, dropping 25.9% compared to the same period a year earlier, to $1.3 billion.

“These strong second-quarter results are the result of the hard work by our people to improve every aspect of our airline,” CEO Doug Parker said in a statement.

Jim Corridore, an analyst with S&P Global Market Intelligence, downgraded his recommendation for American from "strong buy" to "buy" because of the airline's high debt levels. "We expect the airline to continue to generate solid profits and cash from operations," he said.

Looking to the future, American announced July 12 it had renegotiated AAdvantage credit-card agreements with Citi, Barclaycard US and MasterCard that are expected to add $200 million in pre-tax income in the second half of this year and $550 million next year.

American is delaying is purchase of 22 Airbus A350 aircraft, an energy efficient, composite plane. Derek Kerr, chief financial officer, said American and U.S. Airways each had their own fleet replacement plans before the merger in 2013, so the delay is part of merging those plans for wide-body planes.

The new agreement reached July 18 will bring the first two aircraft on board in late 2018, rather than 2017, Kerr said. The airline will also get five planes each year from 2019 through 2022, he said.

President Scott Kirby said the A350 aircraft will serve as replacements for existing routes, but he couldn't say yet which routes would get the new planes later.

“Really what it does is give us flexibility," Kirby said. "This was something Airbus also wanted."

American also wrote off about $20 million for federally regulated slots to take off and land at Newark Liberty Airport, Kerr said. The Federal Aviation Administration removed caps in April on the slots, which had been valuable for airlines to buy or trade. United Airlines, which dominates Newark with a hub there, wrote off $412 million and Southwest Airlines wrote off $21 million for its slots.

DOT: Eight airlines awarded flights to Havana

Earlier this month, the Transportation Department awarded American five daily flights Havana, with four from Miami and one from Charlotte, with service expected to begin in November. American also won permission to fly to five other cities in Cuba, at Camaguey, Cienfuegos, Holguin, Santa Clara and Varadero, as part of an Obama administration to restore relations with the island 90 miles from Florida.

DOT announces day-time flights to Tokyo Haneda

The department this week awarded American a daily daytime flight to Tokyo’s Haneda airport from Los Angeles. Switching the flight from a night-time arrival to the convenient, close-in airport is expected to make local connections easier.