How Did American Airlines Perform Operationally In August?
American Airlines (NASDAQ:AAL) performed well in August, and the monthly metrics are testament to this fact. The company managed to achieve a record total revenue passenger miles (RPMs) of 21.2 billion. As expected, the international markets helped boost traffic figures in the month, while domestic traffic lagged, hurt further by the adverse weather conditions on the East coast.
Overall, the company managed to increase traffic by 3.7% y-o-y, while capacity grew by a modest 3.7%, again owing to its success in international markets, driven primarily by gains in Latin America and Europe. The occupancy rate increased by about 40 basis points, coming in at around 83.3%.
As of the end of August, American continued to expect unit revenues to rise in the 0.5-2.5% range in the third quarter of 2017. That said, Hurricane Irma disrupted flight services in more that 40 airports, resulting in the cancellation of over 5,000 flights. Based on preliminary estimates of the financial impact of the storm, the company now expects its third quarter 2017 unit revenues to be approximately flat.
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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.
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such 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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