Why Are American Airlines’ Domestic Operations More Valuable Than Its International Operations?
American Airlines’ domestic operations have always accounted for a majority of its revenue. However, over the last five years, the importance of the airline’s domestic operations has gone up significantly, since they contribute almost 50% of the carrier’s EBITDA. This growth in EBITDA is largely a result of higher capacity growth in the domestic market post the economic slowdown in 2009-2010. Further, the airfares in the domestic markets have increased faster than the international markets over the last few years. Finally, the network carrier’s operational performance in the domestic markets has been better than the international markets. Consequently, American’s domestic operations hold higher importance for its overall value than its international operations.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for American Airlines
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