Morningstar Key Metrics for American Airlines Group
What we thought about American Airlines Group's earnings
American Airlines Group AAL announced its first quarter results on April 25 and raised its fair value estimate to $13.10 per share, primarily due to the time value of money. Our No Mort rating remains the same. Minor adjustments to fair value estimates due to the Company's enhanced aircraft capital expenditure program and the balance of its pension obligations were offset by a more direct reflection of the value of its deferred tax liability.
American Airlines' results were close enough to management's previous goals that Morningstar's 2024 forecast does not need to change significantly. We are awaiting the impact of several updated collective agreements that the company is negotiating. Flight attendants, for example, recently signed record contracts with Delta Air Lines, and American Airlines is likely to match that. Some competitors, constrained by Boeing Co.'s BA backlog, could run out of production capacity by the end of the year while American Airlines can field relatively new aircraft. However, we believe that structural costs associated with labor and maintenance are likely to overshadow short-term capacity replacement in the impact on American's results.
American Airlines' midcycle operating margin outlook is 10%, approximately 370 basis points below the 2015-2019 average (margins steadily declined over this period). In the medium-term future, we expect structural costs per available seat mile to increase by approximately $0.02 from 2015-19 and passenger revenue yields to decline to near 2018 levels.
The author owns no shares in any securities mentioned in this article.
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