American Airlines Group Inc. announced an operational update of its business.
Pandemic-related regulations imposed on entry into the US at the beginning of 2021 did impact American Airlines’ (AAL) bookings at the beginning of the first quarter. However, on a significant decline in infection and hospitalization rates along with a rise in vaccine distribution during 1Q, the company recently has witnessed strength in domestic and short-haul international bookings.
As of March 26, American Airlines’ statistics reflect a seven-day moving average of net bookings at 90% of the level experienced in 2019, with a domestic load factor of 80%. The company expects strong bookings to continue through the end of the first quarter and into the second quarter.
American Airlines anticipates system capacity (total available seat miles) for the first quarter of 2021 to decline about 40%-45% year-over-year, compared to the prior guidance of a decline of 45%.
Being cautious in the current uncertain demand environment, American Airlines will continue to monitor demand and adjust fleet and capacity, as deemed necessary, on an ongoing basis. At present, the company plans to reactivate most of its aircraft in the second quarter to meet expected demand. (See American Airlines stock analysis on TipRanks)
Following the update, Citigroup analyst Stephen Trent maintained a Sell rating on the stock, based on the “cautious view” on American Airlines’ expected capacity additions and its comments on the seven-day moving average bookings improving to 90% of pre-pandemic levels.
The rest of the Street is bearish about the stock with a Moderate Sell consensus rating. That’s based on 2 Buys, 5 Holds, and 6 Sells. The average analyst price target of $18.89 implies 17.6% downside potential to current levels.
American Airlines gets a 3 out of 10 on TipRanks’ Smart Score ranking, suggesting that it is likely to underperform market expectations.
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