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What’s Dragging American Airlines Stock Down?

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AAL underperformed broader market

American Airlines (AAL) stock has had a rough ride this year so far. The stock has lost 3.6% of its value YTD and has underperformed the broader market as well. The NASDAQ, the S&P 500, and the Dow Jones have gained 16.1%, 10.1%, and 13.3%, respectively.

American Airlines stock has also underperformed the iShares Transportation Average ETF (IYT), which has gained 14.2%. The ETF invests in US transportation stocks listed on the Dow Jones and has allocated 16.7% of its portfolio to the passenger airline industry. American Airlines stock has also been one of the worst performers among its peers. Southwest Airlines (LUV), Delta Air Lines (DAL), and JetBlue Airways have returned 11.9%, 8.8%, and 9.4%, respectively, YTD.

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What’s hurting the stock?

Multiple factors have been behind American Airlines stock’s dismal performance this year. Global slowdown concerns and ongoing trade tensions between the US and China kept markets highly volatile. Additionally, the airline also experienced business disruptions due to the partial government shutdown in January and the grounding of Boeing’s (BA) 737 MAX planes since mid-March.

Boeing’s 737 MAX planes have been grounded worldwide after two deadly crashes wherein 346 people lost their lives. American Airlines owns 24 of these aircraft. In the first quarter, the company registered 2,140 total flight cancelations due to government shutdowns and troubles with Boeing’s planes. As a result, the company recorded sluggish revenue growth of 1.8% in the quarter compared with the mid-single-digit percentage growth it had registered in the preceding four quarters.

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