American Airlines: The Year In Review

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The airline industry in the U.S. saw top and bottom lines jump throughout the first half of the year, while hurting throughout the second half. This is true in the case of American Airlines (NASDAQ:AAL) as well. The company beat both, the earnings and consensus estimates, in the first two quarters of the year. That said, like many of its competitors, the airline suffered heavily towards the second half of the year on adverse weather conditions that forced the carrier to cancel over 8,000 flights in Q3 alone.

Additionally, unit revenues came in positive throughout every quarter in 2017, making American the only airline among its peers to achieve such a long streak.

Key Highlights From The Year:

  • The stock price fell severely after the latest earnings call as American announced its decision to more than double its rate of seat supply in 2018. At a time when most carriers are suffering the effects of adverse pricing conditions, American pushed a step further in its attempt to retain market share. Analysts across the board worried that this could lead to an oversupply situation that forces key players to further discount (already low) ticket prices in order to compete efficiently. That said, American Airlines CFO, Derek Kerr, has assured investors that he plans to “take a measured approach to matching our planned capacity levels.” We can learn more about this in January, when the airline hopes to lay out its final plan for 2018.
  • Like United, American managed to find itself in the middle of some bad press in the year. In Q3, the airline was issued a warning by the NAACP. The organization issued a national warning, in which it highlighted disturbing incidents reported by African-American passengers traveling with the airline. According to the report, African-American passengers reported many incidents where the airline had subjected them to disrespectful, discriminatory, or unsafe conditions. Such incidents, and its recognition by the NAACP, hurt the company’s reputation, and is consequently expected to hurt the top line going forward. The Q4 earnings call will shed more light on this matter.
  • In the year, the company continued its aggressive fleet modernization program – slated to be the most aggressive in aviation history. In the Q2, American undertook the delivery of 20 new aircraft in an attempt to replace older aircraft in the fleet. Additionally, in 2017, the airline greatly expanded its Basic Economy and Premium Economy products, thereby allowing more choice to its customers. Further, the company introduced new technologies, like proactive bag notification and auto re-accommodation tools, that made it even easier for customers to fly with the airline.
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