FILE PHOTO - An American Airlines Boeing 757 aircraft takes off at the Charles de Gaulle airport in Roissy, France, August 9, 2016. REUTERS/Jacky Naegelen/File Photo

NEW YORK (Reuters) - American Airlines AAL.O on Thursday reported an 11 percent drop in quarterly profit from a year earlier as labor and fuel costs bloated operating expenses, sending shares lower in premarket trading. American, the No. 1 U.S. carrier by passenger traffic, reported fourth-quarter net profit of $258 million, or 54 cents per share, down $31 million from $289 million, or 56 cents a share, a year earlier.

The Fort Worth, Texas-based carrier’s shares were down 1.2 percent in premarket trading.

On an adjusted basis, American earned 95 cents a share, topping analysts’ consensus forecast for 92 cents, according to Thomson Reuters I/B/E/S.

In 2017, American stunned investors by offering its pilots and flight attendants a mid-contract pay increase that is set to cost $350 million each year in both 2018 and in 2019.

As a result, quarterly operating expenses climbed 9.8 percent from a year earlier to $9.9 billion, with a 23.5 percent jump in consolidated fuel expenses and a 7 percent increase in salaries and benefits.

American's results follow reports by rivals Delta Air LinesDAL.N earlier this month and United Airlines UAL.N earlier this week.

United’s expectation that it would be raising capacity at a clip of between 4 percent and 6 percent each year until 2020 sent sector shares tanking amid concerns of a growing industry airfare war. [L4N1PJ4S4]

In line with its previous guidance, American said it expects its 2018 total system capacity to be up 2.5 percent from a year earlier, though actual capacity growth may be slightly higher following a brutal Atlantic hurricane season last year.

For the current quarter, American forecasts that total unit revenue will grow 2 percent to 4 percent on the year.