American Airlines Group Inc. (AAL.O) forecast a US$400 million drag on this year’s pretax earnings from the grounding of Boeing Co.’s (BA.N) 737 Max jetliner.

The impact of the flying ban includes a US$175 million blow in the second quarter, American said in a statement Thursday. The world’s largest carrier has removed the beleaguered plane from its schedule through Nov. 2. Southwest Airlines, the biggest operator of the Max, pulled the plane through Jan. 5 earlier Thursday.

Key Insights

American, which has 24 Max jets, is getting a modest silver lining from the grounding, which has given airlines more room to raise fares by cutting the number of seats available. The company said revenue for each seat flown a mile, a gauge of pricing power, would increase  one per cent to three  in the current quarter.

American had record sales in the second quarter and said demand remains robust. The company raised its 2019 earnings forecast to at least US$4.50 a share, from a previous outlook of no less than US$4. Delta Air Lines Inc. and United Airlines Holdings Inc. recently raised their 2019 profit forecasts.

American said its operations continue to be hobbled by a “significant number of flight cancellations and delays” from what the company has said is a work slowdown by its mechanicsunion. The labor group hasn’t had a new contract since American merged with US Airways in December 2013.

Market Reaction

American fell 2.1 per cent to US$33.85 before the start of trading in New York. The shares climbed 7.7 per cent this year through Wednesday, the worst on a Standard & Poor’s index of the five largest U.S. airlines.

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American’s pretax margin excluding certain items increased to 9%. Earnings of US$1.82 a share surpassed the US$1.80 average of analyst estimates compiled by Bloomberg.