American Airlines tops 1Q profit views; unveils pay boost

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Wall Street isn't happy. The flight attendants had previously asked for a mid-contract negotiation to have their pay more in line with industry leaders Delta and United.

American Airlines reported its first-quarter profits for 2017 Thursday and it was expected to show something interesting: the airline is making more money selling miles than seats, a report says.

On Thursday's earnings call, Parker attempted to persuade skeptical stock analysts of the value of keeping morale high in its labor force. "Shareholders get leftovers", wrote Citi analyst Kevin Crissey in a note to clients.

American Airlines pilots now get an average monthly salary of between about $6,500 and $25,000, depending on years of experience, according to independent airline consultant Kit Darby.

Rising costs hit the bottom lines of all the major airlines in the first quarter.

"This is good news and an important step to a culture change and rebuilding the trust at American Airlines", Captain Dan Carey, the APA president, said in a statement. Earlier this month, a passenger was forcibly removed - and bloodied in the ensuing melee - from a flight operated by United Continental Holdings Inc.

American shares fell Thursday by nearly 7% to $43.16. American said revenue for each seat flown one mile, a proxy for average fares, rose 2% in the first quarter and expects it to rise again in the second quarter.

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American's pilots and flight attendants signed onto a new five-year agreement in 2015, and received a 23% raise at the time.

The union employees have been complaining loudly that they are paid less than their counterparts at Delta and United.

Responding to skeptical analysts the day after the pay raise, Parker described the higher wages as a correction to years of "incredibly hard times" for airline employees.

"This investment is going to make a difference in our service", Parker said Thursday, with the equalized salaries helping Fort Worth-based American close a revenue gap it suffers with other carriers. Jamie Baker of Morgan Stanley downgraded American shares to "neutral" from "overweight", saying the pay decision "establishes a worrying precedent, in our view, both for American and the industry".

Over all for the latest quarter, American Airlines reported net income of $234 million, or 46 cents a share, compared with $700 million, or $1.14 cents a share, in the year-prior quarter. The company's earnings per share excluding special items of 61 cents beat analyst expectation by 5 cents, according to the website Seeking Alpha, and its revenue of $9.62 billion topped expectations by $10 million.

The world's largest airline posted revenue of $9.62 billion in the period, which met Street forecasts. But the increase in costs was an even sharper 11 percent.

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