How Did American Airlines Perform Operationally In February?
After growing its capacity by 1.2% in January 2017, American Airlines pared it by roughly -3.7% y-o-y in February 2017. This is being done in order to streamline operations, and help turn around PRASM numbers. On a surprising note, the cuts in capacity were led by Latin America, closely followed by Atlantic, which has been under pressure for a while now. Domestically, too, the capacity was down as much as 5% y-o-y. However, the capacity streamlining helped push the load factor up in February to 77.3%.
In terms of unit revenues, American continues to expect a rise to the tune of 2.5% in the first quarter of 2017. This is attributable to the capacity discipline the company has been practicing on international routes and the improvement being seen in yields.
In a trend, which appears to be industry-wide, American became the third carrier to see its revenue passenger miles and the number of passengers boarded decline in the month. While the decline in passenger miles can be understood by the consequential reduction in capacity, the falling number of passengers enplaned 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 first quarter to be in the 3%-5% range, due to higher operating costs and tax expense.
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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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