How Did American Airlines Perform Operationally In December?
Through the year, American Airlines has grown its capacity in small amounts as opposed to its peers. The last quarter of 2016 was no different. The legacy carrier’s capacity in December was up slightly at 0.5%, causing the year to date capacity to grow by approximately 1.7%. This is in line with the company’s full year capacity growth guidance. Further, the company emphasized that it will continue to maintain capacity discipline in FY 2017, such that the growth is limited to a percentage point. This is likely an effort to control the negative headwinds its unit revenues are suffering from, especially in the Pacific and Atlantic, and manage the excess capacity that has been built into the system. The 100 bps decline in load factor in December and 130 bps decline seen in the full year 2016, is indicative of this excess capacity.
In terms of unit revenues, American has done a spectacular job at arresting the fall in the metric. It may become the first airline to report positive unit revenues for the fourth quarter. The carrier has revised its guidance for the final quarter of the year from a decline of (1%)-1% to a likely increase in the range of 0%-2%. This is attributable to the capacity discipline the company has been practicing on international routes and the improvement being seen in yields, especially Latin America.
However, the revenue passenger miles and the number of passengers boarded continued to decline in the month. This doesn’t bode well for the airline, and may impact its top line negatively in its upcoming quarterly results. Further, the management said that it expects its pre-tax margin for the fourth quarter to be in the 7%-9% range, due to higher operating costs and tax expense.
- Should You Pick American Airlines Stock At $14 After A 6% Fall In A Week?
- With 20% Gains This Month Is Alaska Air A Better Pick Than American Airlines Stock?
- Which Airlines Stock Will Offer Better Returns – American Or United?
- What To Expect From American Airlines’ Q2?
- Will American Airlines Stock Recover To Its Pre-Inflation-Shock Level?
- Pick Either American Airlines Stock Or Its Peer – Both May Offer Similar Returns
Have more questions about American Airlines (NYSE:AAL)? See the following links:
- What Does The Future Look Like At American Airlines?
- What Could Be The Potential Impact Of Multi-Fold Increase In Passenger Demand On Airlines?
- How Did American Airlines Perform Operationally In October?
- American Airlines Q3’16 Earnings Review: Unit Revenues Improve, But Costs Increase
- American Airlines Q3’16 Earnings Preview: Reduction In Capacity To Partially Offset Lower Unit Revenues
- Why Are Airline Manufacturers Witnessing A Slowdown In Commercial Orders?
- Air Traffic Under Closed Economic Policies Due To Hostile Situations: Downside Scenario
- Air Traffic Under Liberal Economic Policies: Upside Scenario
- How Will American Airlines Benefit From Its New Fleet Plan?
- What Are The Factors Behind Soaring Air Travel Growth?
- How Important Will American’s International Operations Be In 2020?
- How Will American Airlines’ Equity Value Move, If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- Why Are American Airlines’ Domestic Operations More Valuable Than Its International Operations?
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
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap