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2024-03-08 16:53:00 +0300

Travel Demand Aids American Airlines (AAL) Amid High Debt

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Nasdaq
By Zacks

We have recently updated a report on American Airlines Group Inc. AAL.

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Thanks to an improvement in air-travel demand in the United States, despite omicron-led woes, American Airlines witnessed a 5.1% sequential increase in fourth-quarter 2021 passenger revenues. With economic activities picking up, passenger revenues (up 79.5% in 2021) have been increasing from the beginning of 2021 itself.

Management's focus on generating cargo revenues is encouraging and is supporting the top line. In 2021, cargo revenues increased 70.8% year over year, with cargo yield per ton mile moving 13.74% northward.

The current scenario of rising fuel costs does not bode well for the airline. During the fourth quarter, the average fuel price per gallon (including related taxes) climbed to $2.36 from $1.27 a year ago. With oil prices continuing to move up, the company estimates the average fuel price per gallon to be even higher in the March quarter. Fuel cost per gallon in first-quarter 2022 is expected in the $2.41-$2.46 band.

American Airlines current ratio (a measure of liquidity) at the end of fourth-quarter 2021 stood at 0.91. A current ratio of less than 1 is not desirable as it implies that the company doesn't have enough liquid assets to cover its short-term liabilities.

Zacks Rank & Stocks to Consider

American Airlines carries a Zacks Rank #3 (Hold).

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