American Airlines Group, Inc. (NASDAQ)
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High fuel
prices certainly affect airline stock prices. But is it so dramatic? Airlines
have fewer flights in 2022 while their revenues are close to 2019 figures.
According to the U.S. Bureau of Economic Analysis the price of an average
airline ticket in 1978 was $695 and if we consider the change in inflation since then, we may see
that things are not so bad as now the
price of an average airline ticket is at $297. It is estimated that the average
American could have travelled by air 43 times a year back then, compared to 117 times this year. In other
words, rising ticket prices could hardly affect airlines business.
American
Airlines has seen a 12% rise for Q2 2022 revenues compared to the same period
of 2019 despite the number of passengers dropping by 8%. The risk of rising
pilot wages by 17% by 2024 should be mentioned. This raise was decided by the
company after a bug was discovered in the internal staff distribution system
that prompted a shortage of pilots compared to the scheduled flights. This bug
allowed pilots to refuse to pilot 12,075 flights in order to pressure the
company to raise salaries. This refusal resulted in a triple hike of pilots’
wages to fly during the hot summer season. Other airlines like Delta and United
Airlines have been forced to raise wages too considering understaffing after
the COVID-19 pandemic.
American
Airlines has a large $25 billion debt that primarily rose due to new aircraft
purchases. The company has $12 billion of fixed assets. The company’s
management is planning to lower its net debt to $15 billion by 2025, which
would increase net cash flows improving its fiscal balance. The forward P/EPS
ratio for 2023 is forecasted at 6.4, which is extremely low for an airline.
The
mid-term target price for American Airlines is at $20.
American Airlines Group, Inc. (NASDAQ)
Ticker | AAL |
Contract value | 100 shares |
Maximum leverage | 1:5 |
Date | Short Swap (%) | Long Swap (%) | No data |
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Minimum transaction volume | 0.01 lot |
Maximum transaction volume | 100 lots |
Hedging margin | 50% |
USD Exposure | Max Leverage Applied | Floating Margin |
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