How Did American Airlines Perform Operationally In September?
In the month of September 2016, the legacy carrier, American Airlines, saw its capacity decline slightly at 0.4%, causing the year to date capacity to grow by approximately 2.2%. This is in sharp contrast to carriers like JetBlue, who have taken advantage of low fuel prices to expand their capacity by as much as 10% in the year so far. The cut in capacity growth at American is likely an effort to control the negative headwinds its unit revenues are suffering from. The company said that it expects its unit revenues in the third quarter to fall in the 2%-3% range, as opposed to previous guidance of 3%-5%.
In terms of passenger traffic, revenue passenger miles fell by 1.7%, lower than August, while passengers boarded declined by 2.2%. This is surprising, given all other major airlines saw their key metrics improve in the month. Further, its occupancy factor was also down 1.1% to 81.6%, indicating it couldn’t fully utilize its existing capacity, and thus the reduction in capacity is a welcome move. The management said that it expects its pre-tax margin for the third quarter to be slightly higher than the previous guidance of 12%-14%.
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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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