TLDR
- American Airlines is keeping its full-year profit outlook even as fuel costs rise sharply.
- CEO Robert Isom says corporate travel is up 13% year over year and leisure demand remains strong.
- The carrier is roughly 80% booked for Q2, with premium demand helping absorb higher costs.
- UBS raised its AAL price target from $16 to $18, keeping a Buy rating, citing Middle East conflict resolution as a catalyst.
- Spirit Airlines’ collapse has already driven a quick uptick in American’s basic economy bookings.
American Airlines is holding its full-year profit outlook even as fuel prices climb. CEO Robert Isom made the case at a Bernstein investor conference Wednesday, pointing to strong revenue, premium demand, and corporate travel as the pillars keeping the carrier on track.
American Airlines Group Inc., AAL
AAL stock was trading up around 3.2% on the day, sitting near $14.65 ahead of the conference remarks.
Isom described demand as K-shaped ā higher-income travelers are spending freely, while middle- and lower-income customers are more cautious. That divergence isn’t stopping the airline from filling seats. American is roughly 80% booked for Q2, which gives management decent visibility heading into the summer travel period.
Corporate travel is a bright spot. Isom said it’s up 13% year over year. That’s a meaningful number for an airline that spent years rebuilding corporate relationships after a strategy pivot that deprioritized business travelers.
Leisure demand is also holding up. Between the two, American appears comfortable enough with the revenue picture to absorb the hit from elevated oil prices.
The Spirit Airlines story is already showing up in the data. After Spirit ceased operations and began winding down ā the first major U.S. airline liquidation since Midway in 2001 ā American saw an immediate jump in basic economy bookings. That’s the low end of the market where Spirit played hardest.
UBS Lifts Price Target to $18
One day before the Bernstein event, UBS raised its AAL price target from $16 to $18 while holding its Buy rating. The bank pointed to potential conflict resolution in the Middle East as a meaningful catalyst for airline stocks more broadly.
UBS ranks United Airlines as its top pick in the sector, with Delta, Alaska Air, American, and Southwest rounding out the list in that order. Still, the firm’s estimate of roughly 50% EPS growth across several airlines by 2027 is a bold number that could attract more attention to the sector.
Eight analysts have revised their AAL earnings estimates upward for the upcoming period, according to InvestingPro. That kind of consensus shift tends to get noticed.
That said, AAL’s current P/E of 46 reflects a lot of optimism already baked in. The stock has risen nearly 15% over the past week, and InvestingPro flags it as overvalued relative to its Fair Value estimate.
The U.S. Global Jets ETF is down 3.5% year-to-date, lagging the S&P 500’s roughly 10% gain. UBS sees that gap as an opportunity.
Spirit’s Exit Reshapes the Low-Cost Picture
Bank of America analysts noted that Spirit’s liquidation will have minimal impact on the broader aerospace industry. Airlines showed no interest in acquiring Spirit’s aircraft, citing cabin configuration issues.
For American, the immediate effect has been practical: basic economy seats are filling faster. Whether that holds through Q3 is another question, but the early signal is positive.
American’s Q2 booking position of 80% is the most concrete forward-looking data point Isom offered Wednesday.
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