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American Airlines: 4Q17 Revenue Estimates

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American Airlines’ 4Q17 revenue estimates

American Airlines’ (AAL) revenue for 4Q17 is expected to be $10.54 billion—an increase of 7.80% on a year-over-year basis. American Airlines reported revenue of $9.78 in 4Q16. If it reports the expected revenue, it will be a record fourth-quarter revenue. Since 2013, American Airlines’ fourth-quarter revenue has grown at a compound annual growth rate of 9.90%.

The projected increase in American Airline’s revenue is expected to be driven by the higher total revenue per available seat mile, which is expected to grow 5%–6% over last year. Previously, American Airlines expected the increase to be 2.5%–4.5%. The increase is due to the continued demand for air travel. In 3Q17, American Airlines witnessed a higher yield in all of the geographical locations—specifically in Latin America. The trend is expected to continue in 4Q17 as well. American Airlines also introduced new services to Reykjavik, Iceland, which will have a positive impact on its revenue.

American Airlines’ revenue could get help from continued weakness in the US dollar. From September to December 2017, the US Dollar Index, which measures the dollar’s movement against a basket of currencies, fell 1.0%. For fiscal 2017, the US Dollar Index has fallen ~9.90%.

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Cargo revenue

The other important factor for higher revenues would be higher revenue growth in cargo. American Airlines’ cargo revenue in 4Q17 is projected at ~$230 million—an increase of 18.60% over the previous year. In 4Q16, American Airlines reported cargo revenue at $194 million.

Investors can hold American Airlines indirectly by investing in the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ), which has invested 5.50% of its portfolio in American Airlines. The fund also provides exposure to Marriott International (MAR), SkyWest (SKYW), and Time Warner (TWX) with weights of 5.3%, 2.80%, and 4.80%, respectively, as of January 17, 2018.

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