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What to Know before American Airlines’ 1Q17 Earnings Release

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Part 2
What to Know before American Airlines’ 1Q17 Earnings Release PART 2 OF 6

Will American Airlines’ 1Q17 Revenue End Its 2017 Falling Streak?

American Airlines’ revenue

After it fell in 2015 and 2016, analysts are finally expecting American Airlines’ (AAL) revenue to show growth in 2017. For 1Q17, analysts are expecting American Airlines’ revenue to rise 1.8% to $9.6 billion.

In 2Q17, the company’s revenue is expected to rise 4.5% to $10.8 billion, and in 3Q17, it’s expected to rise 4.7% to $11.1 billion. It’s expected to end 4Q17 with a rise of 4.3% to $10.2 billion, leading to 2017 revenue growth of 3.7% to $41.7 billion, compared to $40.2 billion in 2016.

Will American Airlines&#8217; 1Q17 Revenue End Its 2017 Falling Streak?

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Capacity growth

For 2017, American Airlines expects its capacity to rise ~1.5% year-over-year (or YoY), compared to its earlier expectation of 1.0% YoY. All of this growth will likely come from its international capacity growth of 4.0% YoY. Its domestic capacity is expected to remain flat compared to 2016.

According to American Airlines, its increased capacity guidance is due to improved completion factor in 1Q17 and increased regional capacity. However, we think that this increased capacity guidance is also in response to United Continental’s (UAL) deciding to be an aggressive player and increasing its capacity 2.5%–3.5% in 2017. For more information, read United’s Increased Capacity Growth: Should Investors Worry?

Outlook

American Airlines expects its 1Q17 total revenue per available seat mile (or TRASM) to improve 2.0%–4.0% compared to the 3.7% fall it saw in 2016. United Continental is also expecting its unit revenue to improve in 1Q17, while Alaska Air Group’s (ALK) unit revenue is expected to fall 3% YoY in the same period.

Legacy carrier Delta Air Lines (DAL) recently reported a 0.5% unit revenue fall in 1Q17. Investors can gain exposure to American Airlines with low risk by investing in the PowerShares Buyback Achievers ETF (PKW), which holds 1.1% in the stock.

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