American Airlines (AAL) - Get Report shares extended gains Friday, pulling domestic rivals firmly higher for a second consecutive session, as carriers move to add more capacity amid easing U.S. lockdowns and loosening international travel restrictions.
American Airlines saw its shares surge more than 41% yesterday, the biggest single-day gain on record, in a roaring Thursday session after the nation's largest carrier said it would hit more than 55% of its July 2019 capacity next month as it ramps-up domestic flights in the wake of the coronavirus pandemic. International capacity, the airline said, is expected to rise significantly as well, but will only hit 20% of last year's levels.
“We’re seeing a slow but steady rise in domestic demand. After a careful review of data, we’ve built a July schedule to match,” said American’s senior vice president of network strategy Vasu Raja,. “Our July schedule includes the smallest year-over-year capacity reduction since March."
"We’ll continue to look for prudent opportunities to restore service so our customers can travel whenever and wherever they are ready,” he added.
American Airlines shares were marked 23.2% higher in early trading Friday at $20.57 each, a move that would extend the stock's year-to-date decline to around 28%.
Delta Air Lines (DAL) - Get Report shares, which have slumped more than 44% so far this year, were marked 10.3% higher at $35.73 each while United Airlines (UAL) - Get Report was seen 16% higher at $45.39 each. Southwest Airlines (LUV) - Get Report, meanwhile, was marked 5.3% higher at $40.30 each.
On Thursday, China said it would ease restrictions on income air traffic now that the world's second-largest economy is well past the worst of its coronavirus crisis, while several reports suggested the U.S. Department of Transportation could revise its ban on incoming flight from China as a result.
The International Air Transport Association, also known as IATA, said earlier this week that global carries have cut their domestic fares by an average of 23% last month, even as passenger traffic jumped 30% from its April trough.
The mis-match represents a profitability squeeze that could ultimately lead to industry-wide revenues losses of $314 million this year, IATA has warned.
"We don’t believe anyone’s view on American Airlines' stock fundamentally changed as a result of any news this week," said Credit Suisse analyst Jose Caiado. "Let us not lose sight of American's (nearly $40 billion) debt load and high-single digit leverage ratio at YE 2021E that the company will need to dig out of, and our expectation that EPS will remain negative next year, weighed down by the heavy interest burden."