American Airlines Back in the Picture

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American Airlines Back in the Picture

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Overview

American Airline’s share surged 41% on volume which is about 400 million shares after American Airlines expects an improvement in flights in July to be more than half of last year’s capacity. To lead a broad rally in the airline sector, American Airline’s stocks went up to record again on June 4, 2020. This was observed after the carries directed that it was increasing the capacity between increasing indications that the worst phase of the COVID-19 pandemic was over.

Analysis

American Airlines stock surged 41.3% which was recorded as the highest close since March 10, which marked the biggest one-day percentage gain from the day it started trading in it present form in December 2013. The last record rally of 35.8% was observed on March 24 in hope of the path of a government bailout package which included a $50 billion package for the US airline and air cargo industry. Trading volume expanded to 394.4 million shares, over pacing the last record of 138.1 million shares on April 7, 2020 which was compared to the full day average of nearly 71.7 million shares.

American Airlines expressed its view on Thursday mentioning that it is hoping to fly again in July about 55% of the domestic capacity that was flown in July last year as there was an improvement in the load factor from 15% in April to 55% at the end of May. Senior vice president of network strategy, Vasu Raja also mentioned that a slow but a steady rise in domestic demand can be seen. American Airlines’ stock had its biggest-ever weekly gain as it escalated 59.4% between a four day win streaks, outshining the last record of 35.3% for last week ended on March 27. The rising demand experienced by American Airline is aligning with other industry data points which describes a on-going jump in travel demand off a bottom observed in April.

TSA, the Transportation Security Administration pointed out that the daily average of travellers in a week going through its checkpoint has been better for six long weeks. Approximately an average of 305,358 people went through Transportation Security Administration checkpoint per day in the week ended May 31, or more than thrice the low of 97,799 noted during the week ended in April 19, reason being the shelter-in-place orders and travel restrictions due to the corona virus pandemic. American Airlines expects to have $11 billion in total liquidity by year ending 2020 which would be sufficient to balance the crisis.

Bottom line

Shares of American Airlines and other carriers lost over half of their value starting from February on panic of widespread bankruptcies in this industry. In particular American Airlines shares were hit hard as the company had the most debt in comparison to the other major carries in the US. And it became vulnerable to the extended downtrend. But there are visuals that proof that demand might have dropped down in April, but the initial phase of recovery are at hand. Compared to 6800 flights daily before the pandemic outbreak, American Airlines plans to depart 4000 flights daily in July.

In order to attract passengers, American Airlines are considering steps that include eliminating change fees and awarding double frequent fliers miles, which will also help to boost customer confidence as American Airlines focuses more on cleaning and distancing techniques. There still prevails the risk of round 2 of the pandemic or even the economic slowdown that could restraint the lucrative corporate travellers. American Airlines schedule expansion suggests that it is safe to invest in airlines considering that the investors focus more on the top performers avoiding the undesired risk until the fear of pandemic is reduced.

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