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American Airlines (AAL) Clears Doubts Over Bankruptcy Filing

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At a conference held on Wednesday, American Airlines Group (AAL - Free Report) informed that it will not file for bankruptcy protection. Reportedly, there were talks that a major U.S. airline might go out of business once the government aid for it expires.

The company’s chief executive officer Doug Parker stated, "Bankruptcy is failure. We're not going to do that." He feels that no airline is likely to “go by the wayside as a result of this crisis."

He further predicted that the U.S. airline industry is likely to shrink by 10-20% in summer 2021 and its rebound would depend on passenger demand and revenues generated.
 
With easing travel restrictions, American Airlines, carrying a Zacks Rank #3 (Hold), is seeing modest increases in passenger numbers. New bookings have been more than the number of cancellations over past few weeks. During the U.S. Memorial Day weekend, the carrier’s aircraft was filled about 56%. The passenger load is encouraging although it reflects a significantly reduced capacity. The carrier is operating only about 20% of its usual schedule compared to a year ago.


U.S. carriers like Delta Air Lines (DAL - Free Report) and United Airlines (UAL - Free Report) are also witnessing increases in travel demand. Earlier this month, Delta revealed plans to increase its summer capacity amid signs of improvement in domestic travel demand. The company’s CEO Edward Bastian hopes to add around 200 flights in June and another 200 or 300 in July.

In an SEC filing, United Airlines stated that as of May 18, the airline had witnessed reduction in cancellation rates and a “moderate improvement in demand” in domestic markets as well as some international routes for the remainder of the second quarter of 2020.

Both Delta and United Airlines carry a Zacks Rank #3.

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A better-ranked stock in the same space is Ryanair Holdings (RYAAY - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ryanair has an impressive earnings history having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 62.7%.

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