How Important Will American’s International Operations Be In 2020?
The global air travel market is expected to grow around 3% annually over the next few years, as opposed to the 2% growth in the US domestic markets. Consequently, there is more scope for airlines to expand their operations internationally. Accordingly, we believe that American Airlines’ international operations will play a critical role in its long-term valuation.
The network carrier’s international revenue is expected to decline in the near term due to the foreign currency fluctuations. However, over the long term, we forecast the currency headwinds to reduce and result in higher international revenues by 2020. Although, on the cost side, the legacy carrier is likely to experience higher fuel costs due to the recovery in crude oil prices over the next five years. Yet, despite the decline in EBITDA, American’s international operations will be a notable portion of its long-term value.
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Have more questions about American Airlines (NYSE:AAL)? See the following links:
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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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