American Airlines’s Traffic Growth Lags Its Capacity Growth



Traffic growth

In August 2016, American Airlines’s (AAL) traffic fell 2.8% year-over-year (or YoY), significantly lagging its capacity growth in the same period. So far in 2016, AAL’s traffic has increased 1.0%.

However, through most of 2016, American Airlines’s traffic growth has lagged its capacity growth, in contrast to its 2015 trend. Through most of 2015, AAL’s traffic growth exceeded or matched its capacity growth.

Airline traffic is measured by revenue passenger miles (or RPM). RPM is the number of revenue passengers multiplied by the total distance traveled.

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Domestic markets

American Airlines’s (AAL) domestic traffic fell 3.7% in August 2016. In contrast, its peers Alaska Air Group (ALK) and Delta Air Lines (DAL) witnessed strong growth in their domestic markets. United Continental’s (UAL) domestic traffic was flat during the month.

Year-to-date, AAL’s domestic traffic rose 0.6%. AAL forms ~2.7% of the PowerShares Dynamic Market Portfolio ETF (PWC).

Pacific drives international markets

Like United Continental, whose international traffic growth was seen mostly in the Pacific market, American Airlines’s (AAL) international traffic growth also comes from the Pacific region.

In August 2016, AAL’s international traffic fell 3.1% YoY. An 18.4% YoY growth in the airline’s Pacific traffic partially offset its 6.2% and 7.1% decline in Atlantic and Latin American traffic, respectively, during the same period.

In the final part of this series, we’ll discuss how these supply and demand factors have affected AAL’s unit revenues.


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