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Did American Airlines’s Capacity Growth Continue in August 2016?

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American Airlines’s capacity

American Airlines’s (AAL) capacity grew 1.4% year-over-year (or YoY) in August 2016. AAL’s capacity has grown 2.5% so far in 2016, which is higher than the airline’s total capacity growth of 1.1% for fiscal 2015.

Airline capacity is measured using available seat miles (or ASM). ASM is calculated as the number of seats available multiplied by the number of miles traveled.

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Domestic capacity

For August 2016, American Airlines’s (AAL) domestic capacity has increased 0.5%. AAL’s peers Delta Air Lines (DAL), United Continental (UAL), and Alaska Air Group (ALK) also increased their domestic capacity, which led to increased competition and an adverse impact on yields. We’ll discuss yields in detail later in this series.

International capacity

American Airlines’s international capacity increased 1.0%, mainly due to the 25.8% YoY increase in the Pacific region. Its Atlantic capacity decreased 0.6% YoY in August 2016, and its capacity in Latin America decreased 5.3%.

Outlook

American Airlines (AAL) expects its capacity to rise 2% in 2016, driven equally by growth in the domestic and international markets. Both domestic and international capacity are expected to rise 2%, which is in contrast to AAL’s earlier plan of 6% growth in its international capacity.

The increased international capacity is intended to make AAL a relevant player in the Asia-Pacific market, up from the distant third position it currently holds behind United Continental and Delta Air Lines.

Investors can gain exposure to AAL by investing in the PowerShares Dynamic Market Portfolio ETF (PWC), which invests ~2.7% of its portfolio in AAL.

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