How Did American Airlines Perform Operationally In April?
American Airlines (NASDAQ:AAL) failed to impress investors with its key metrics this time around. While the company is seeing good improvements in capacity and traffic in international markets, the domestic market continues to remain flat.
Overall, the company managed to increase capacity by about 0.8% y-o-y. That said, traffic grew by a modest 3.1%, again owing to its success in international markets, driven primarily by gains in Latin America. The occupancy rate increased by about 180 bps, coming in at around 82.2%. In terms of unit revenues, American continues to expect a rise to the amount of 2-4% in the first half of 2017. This is attributable to the capacity discipline the company has been practicing on international routes and the improvement being seen in yields.
Additionally, we can expect costs to go up progressively throughout the year on the back of American’s decision to increase the wages of its pilots and air attendants. The airline has agreed to increase the pay by about 5% for air attendants and 8% for pilots. The pay hike is expected to add $930 million in costs through 2019. The decision comes at a time when fuel costs are increasing rapidly and the trend is expected to remain constant in the near term.
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