FORT WORTH, Texas – American Airlines is logging record profits and rewarding shareholders just one year removed from bankruptcy court and a big merger.

The airline is getting a huge lift from cheaper fuel – savings could top $5 billion this year – and travel demand that shows no sign of weakening. CEO Doug Parker says 2015 is shaping up as another strong year.

But amid a broader market sell-off, American’s shares fell 5 per cent – more than other major U.S. carriers – after the company said that a key revenue figure would decline in the first quarter. American said revenue for each seat flown one mile would be 2 per cent to 4 per cent lower than a year ago partly because competition is leading to lower fares on about 50 routes.

Much of the new competition is coming from low-cost carriers who are adding flights from cities including Philadelphia, Chicago, Washington and Dallas, American executives said.

American Airlines Group Inc. said Tuesday that fourth-quarter net income was $597 million, reversing a $2 billion loss a year earlier, when one-time costs related to American’s bankruptcy case and the merger with US Airways totalled $2.4 billion.

Excluding one-time costs, the company earned a record $1.1 billion, or $1.52 per share, in the fourth quarter. That was a penny better than expected by analysts, according to Zacks Investment Research.

Airlines are getting a windfall from lower fuel prices, and because travel demand is so strong, ticket prices for many passengers are not falling. American will benefit particularly because it doesn’t hedge against higher fuel prices. That means it takes some risk in case oil prices spike, but it captures more of the bonanza when oil prices fall, as they did in late 2014.

American and US Airways cut their fuel bill by 17.6 per cent, and regional affiliates also saved at the pump. That more than offset a 4.2 per cent increase in labour costs.

Lower fuel prices could save the company more than $5 billion in 2015, Chief Financial Officer Derek Kerr said in a call with analysts Tuesday.

Shareholders are getting the payoff. In the second half of 2014, American spent $1 billion buying back its own stock, which makes remaining shares more valuable. The company announced Tuesday that it plans to buy back another $2 billion in stock and pay another quarterly dividend: 10 cents per share.

The company is also raising pay and overhauling the fleet. Pilots are voting this week on a contract with 23 per cent raises. After adding 132 new planes in 2014, American expects 128 more this year while retiring nearly as many older planes.

American seems able to afford that kind of spending – excluding one-time items, it earned a record $4.2 billion in 2014.

“This is the best year in the long, proud history of American Airlines and the best year by a long shot, more than double the prior record,” CEO Parker said on the conference call. He said recent results and the economic outlook made him confident that 2015 will be another outstanding year for the company.

Parker added that even if fares don’t come down with fuel prices, passengers are benefiting because American can finally afford improvements such as lie-flat seats in the front cabin, Wi-Fi on international flights, and better check-in and lounges at airports.

Fourth-quarter revenue was $10.16 billion, up 2.1 per cent and slightly higher than Wall Street’s forecast of $10.14 billion, according to Zacks.

The shares fell $2.75 to close at $52.70. The Dow Jones industrial average fell 291 points – it was down 390 before a small rebound – on weak earnings from Caterpillar and Microsoft and a downturn in orders for durable goods including commercial aircraft.

Shares of Fort Worth-based American began the day up 3.4 per cent in 2015 but finished it down 1.8 per cent for the year so far. They have gained 75 per cent in the past 12 months.