American Airlines Group, Inc. (AAL - Free Report) has issued an upbeat guidance for the fourth quarter of 2017. Following this, shares of the company were up 3.3% to $53.78 at the close of trading session on Jan 10.
The company now expects total revenue per available seat mile (TRASM) for the fourth quarter to rise in the range of 5-6% year over year. Previous view was an increase in the band of 2.5-4.5%. The improved outlook comes on the back of higher yields across all the geographical regions and better-than-expected domestic close-in bookings.
Additionally, the company now expects pre-tax margin between 6.5% and 7% for the to-be reported quarter. Earlier forecast was in the range of 4.5-6.5%.
Consolidated operating cost per available seat mile (CASM), excluding fuel and special items is anticipated to climb around 4% year over year, better than the previous prediction of a rise of 4.5%. Better-than-expected completion factor led to the improved guidance. For 2017, the same is expected to rise around 5.5%, higher than the past forecast of 5% growth.
Average fuel price per gallon (mainline jet fuel, including taxes) is estimated in the range of $1.88-$1.93 for the final quarter of 2017.
The company continues to expect capacity to inch up around 1% for 2017.
Further, the company expects to record a special non-cash credit of $10 million to income tax expense in the to-be-reported quarter. This is due to the impact of the recent tax reform on its deferred tax assets and liabilities.
Recently, another major airline, United Airlines, the wholly owned subsidiary of United Continental Holdings (UAL - Free Report) , has also raised its guidance for the fourth quarter pertaining to unit revenues, costs and pre-tax margin.
American Airlines’ robust guidance positively impacted other airline stocks like Delta Air Lines (DAL - Free Report) too on Jan 10. Consequently, the NYSE ARCA airline index gained 1.7% on the day.
Zacks Rank & Key Pick
American Airlines carries a Zacks Rank #3 (Hold). A better-ranked stock in the airline space is Gol Linhas Aereas Inteligentes S.A. (GOL - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Gol Linhas have soared more than 200%, respectively, in 2017.
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