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American Airlines (AAL) Slips Despite Upbeat May Bookings

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American Airlines Group (AAL - Free Report) has witnessed continued improvement in bookings as more Americans get vaccinated and return to the skies. The airline stated that its seven-day moving average of net bookings (as of Jun 2) was approximately 90% of the level in the comparable period of 2019.

Despite this bullish sentiment, the company did not make commensurate improvements in its second-quarter guidance issued in April. This might have played on investors’ minds, causing shares of American Airlines to decline 3.4% at the close of business on Jun 3.

In a SEC filing dated Jun 3, the carrier stated that its domestic load factor (percentage of seats filled with passengers) in May was around 84% and greater than 88% over the Memorial Day holiday. The airline expects the “strength in bookings to continue through the end of the second quarter and into the third quarter”, provided current demand trends sustain. Moreover, it anticipates “leisure yields to approach or exceed the corresponding 2019 levels during the peak summer travel period.”

On a further positive note, American Airlines is seeing gradual increase in demand among small- and medium-sized enterprises, and some large corporate customers, although business travel demand continues to be suppressed.

Thanks to strong summer bookings, American Airlines,  that has burned millions of dollars in cash since the pandemic began, finally generated cash in May. It expects a liquidity of more than $20 billion at the end of the second quarter, compared with its previous guidance of $19.5 billion.

American Airlines maintains its second-quarter system capacity (total available seat miles) forecast at a decline of 20-25% from the comparable 2019 level. Additionally, total revenues are still anticipated to fall approximately 40% from the 2019 level.

Zacks Rank & Key Picks

American Airlines carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Covenant Logistics Group (CVLG - Free Report) , C.H. Robinson Worldwide (CHRW - Free Report) and United Parcel Service (UPS - Free Report) . While Covenant Logistics and C.H. Robinson sport a Zacks Rank #1 (Strong Buy), UPS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Covenant Logistics, C.H. Robinson and UPS have rallied more than 66%, 15% and 98% in a year’s time, respectively.

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