How Did American Airlines Perform Operationally In July?
American Airlines (NASDAQ:AAL) performed well in July, and the monthly metrics are testament to this fact. The company managed to achieve a record total revenue passenger miles (RPMs) of 21.1 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 a reasonable 0.8% y-o-y. That said, capacity grew by a modest 1.9%, again owing to its success in international markets, driven primarily by gains in Latin America and Europe. The occupancy rate decreased by about 90 basis points, coming in at around 84.3%.
In terms of unit revenues, American continues to expect a rise to the amount of 0.5-3.5% in the third quarter of 2017. This is attributable primarily to the capacity discipline the company has been practicing on international routes and the improvement being seen in yields.
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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 10 percent and 12 percent.
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