How Did American Airlines Perform Operationally In May?

+6.93%
Upside
15.24
Market
16.30
Trefis
AAL: American Airlines logo
AAL
American Airlines

American Airlines (NASDAQ:AAL) performed well in May, and the monthly metrics are testament to this fact. The company managed to achieve a record total revenue passenger miles (RPMs) of 19.9 billion. As expected, the international markets helped boost traffic figures in the month, while domestic traffic lagged.

Overall, the company managed to increase traffic by about 2.6% y-o-y. That said, capacity grew by a modest 2.3%, again owing to its success in international markets, driven primarily by gains in Latin America and Europe. The occupancy rate increased by about 0.2 points, coming in at around 82.1%.

In terms of unit revenues, American continues to expect a rise to the amount of 3.5-5.5% 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. We can expect more clarity on this in the earnings call next month.

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As mentioned in previous reports, costs are expected to rise in the near term on the back of American’s decision to increase the wages of its pilots and air attendants. As part of the deal, the airline has agreed to hike the wages of pilots and attendants by 8% and 5%, respectively. The pay hike is expected to add $930 million in costs through 2019.

In addition, the Company continues to expect its second quarter pre-tax margin excluding special items to be between 12 percent and 14 percent.

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