How Did American Airlines Perform Operationally In August?
In the month of August 2016, the legacy carrier, American Airlines, saw its capacity increase slightly at 1.4%, causing the year to date capacity to grow by approximately 2.5%. 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 is suffering from. The company said that it expects its unit revenues in the third quarter to fall in the 3%-5% range.
In terms of passenger traffic, revenue passenger miles fell by 2.8%, while passengers boarded declined by 3.7%. This is likely due to American’s decision to not launch flights to Cuba and Mexico, unlike other airlines who were quick to leverage off the restoration of relations between the U.S. and the aforementioned countries. Its occupancy factor was also down 3.6% to 82.9%, indicating it couldn’t fully utilize its existing capacity. The management said that it expects its pre-tax margin for the third quarter to be in the 12%-14% range.
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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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