We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will American Airlines Return to Unit Revenue Growth in Q4?
Read MoreHide Full Article
Stocks in the airline space have been plagued by woes related to unit revenues for more than a year. However, the ills related to the issue seem to be mitigating, going by the bullish updates issued by various carriers with respect to revenue per available seat miles (RASM: a key measure of unit revenue measuring sales with respect to capacity of a carrier) for the final quarter of 2016.
Joining the likes of Delta Air Lines (DAL - Free Report) , United Continental Holdings (UAL - Free Report) and Southwest Airlines (LUV - Free Report) , the Fort Worth, Texas-based American Airlines Group (AAL - Free Report) too came out with an improved view on total revenue per available seat mile (TRASM). The view has raised hopes that American Airlines will be the first major U.S. carrier to return to unit revenue growth in two years.
The carrier now expects the metric to be flat to up 2% (on a year-over-year basis) in the fourth quarter. The view represents a marked improvement from the guidance issued last month, when it expected the metric in the band of a decline of 1% to an increase of 1%. The improved view was due to “improving yields.”
Apart from the bullish fourth-quarter unit revenue view, American Airlines raised its guidance for pre-tax margin. American Airlines now expects the metric in the range of 7% to 9% (previous guidance with respect to the metric was in the band of 6% to 8%).
The bullish views impacted the stock positively on Jan 11. In fact, the stock has been performing well for quite some time. The stock comfortably outperformed the Zacks categorized Transportation-Airline industry over the last three months. The stock gained 30.12% compared with the industry which advanced 22.38% in the same time frame.
Due to the recent labor deals inked by the company, costs will increase in the final quarter of 2016. Consequently, the carrier expects consolidated unit cost per available seat mile (CASM: mainline) – excluding fuel and special items – to increase in the band of 9% to 11% in the final quarter of 2016.
The views were revealed by the company alongside its December traffic data. Consolidated traffic, measured in revenue passenger miles (RPMs), declined 0.8% on a year-over-year basis to $18.2 billion. The downside was primarily attributable to the 3% decline in domestic traffic.
Consolidated capacity (available seat miles/ASMs) inched up 0.5% to 22.6 billion in the month. However, load factor or the percentage of seats filled by passengers decreased 100 basis points (bps) to 80.6% in Dec 2016. This was primarily because capacity expanded while traffic contracted, thereby leading to empty planes.
In 2016, American Airlines recorded 0.2% growth in RPMs, while ASMs climbed 1.7%, both on a year-over-year basis. Also, load factor declined 130 bps to 81.7% and the total passenger count (Enplanements) slipped 1.3% in the same period.
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access.Click here for Zacks' private trades >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Will American Airlines Return to Unit Revenue Growth in Q4?
Stocks in the airline space have been plagued by woes related to unit revenues for more than a year. However, the ills related to the issue seem to be mitigating, going by the bullish updates issued by various carriers with respect to revenue per available seat miles (RASM: a key measure of unit revenue measuring sales with respect to capacity of a carrier) for the final quarter of 2016.
Joining the likes of Delta Air Lines (DAL - Free Report) , United Continental Holdings (UAL - Free Report) and Southwest Airlines (LUV - Free Report) , the Fort Worth, Texas-based American Airlines Group (AAL - Free Report) too came out with an improved view on total revenue per available seat mile (TRASM). The view has raised hopes that American Airlines will be the first major U.S. carrier to return to unit revenue growth in two years.
The carrier now expects the metric to be flat to up 2% (on a year-over-year basis) in the fourth quarter. The view represents a marked improvement from the guidance issued last month, when it expected the metric in the band of a decline of 1% to an increase of 1%. The improved view was due to “improving yields.”
Apart from the bullish fourth-quarter unit revenue view, American Airlines raised its guidance for pre-tax margin. American Airlines now expects the metric in the range of 7% to 9% (previous guidance with respect to the metric was in the band of 6% to 8%).
The bullish views impacted the stock positively on Jan 11. In fact, the stock has been performing well for quite some time. The stock comfortably outperformed the Zacks categorized Transportation-Airline industry over the last three months. The stock gained 30.12% compared with the industry which advanced 22.38% in the same time frame.
Due to the recent labor deals inked by the company, costs will increase in the final quarter of 2016. Consequently, the carrier expects consolidated unit cost per available seat mile (CASM: mainline) – excluding fuel and special items – to increase in the band of 9% to 11% in the final quarter of 2016.
The views were revealed by the company alongside its December traffic data. Consolidated traffic, measured in revenue passenger miles (RPMs), declined 0.8% on a year-over-year basis to $18.2 billion. The downside was primarily attributable to the 3% decline in domestic traffic.
Consolidated capacity (available seat miles/ASMs) inched up 0.5% to 22.6 billion in the month. However, load factor or the percentage of seats filled by passengers decreased 100 basis points (bps) to 80.6% in Dec 2016. This was primarily because capacity expanded while traffic contracted, thereby leading to empty planes.
In 2016, American Airlines recorded 0.2% growth in RPMs, while ASMs climbed 1.7%, both on a year-over-year basis. Also, load factor declined 130 bps to 81.7% and the total passenger count (Enplanements) slipped 1.3% in the same period.
Zacks Rank
American Airlines currently carries a Zacks Rank # 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access.Click here for Zacks' private trades >>