How Did American Airlines Perform Operationally In October?
Through the year, American Airlines has grown its capacity in small amounts as opposed to its peers. October 2016 was no different, with the legacy carrier’s capacity up slightly at 0.4%, causing the year to date capacity to grow by approximately 2%. 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 260 bps decline in load factor is indicative of this excess capacity.
In terms of unit revenues, American has done a pretty good job at arresting the fall in the metric. In Q3, the number was down only 3.3%. In the final quarter of the year, it expects the decline to be even less at (0.5%)-(2.5%). 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. Further, the management said that it expects its pre-tax margin for the fourth quarter to be in the 5%-7% range, due to higher operating costs and tax expense.
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Have more questions about American Airlines (NYSE:AAL)? See the following links:
- 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
- How Did American Airlines Perform Operationally In September?
- How Did American Airlines Perform Operationally In August?
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- How Will American Airlines Benefit From Its New Fleet Plan?
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- How Did The Legacy Carriers Perform Operationally In July?
- Lower Unit Revenues, Higher Tax Provisions Weigh On American Airlines’ Q2’16 Results
- American Q2’16 Earnings Preview: Rising Oil Prices, Lower Unit Revenues To Weigh Heavily
- US Legacy Carriers: A Comparison Of Aircraft Fleet
- 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
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