For American Airlines (AAL) - Get American Airlines Group, Inc. Report , Thursday was the same old Wall Street story, with management thinking long-term and investors thinking short-term.

Shares fell after American said it would jump ahead of contract negotiations scheduled for 2019 and 2020, respectively, for flight attendants and pilots, and will award raises totaling $930 million over the next two-and-a-half years.

The raises bring American in line with airlines Delta (DAL) - Get Delta Air Lines, Inc. Report and United (UAL) - Get United Airlines Holdings, Inc. Report .

It hardly sounds disastrous to pay employees what peers pay employees, but the stock market's reaction was extreme.

Even though American's earnings and outlook, particularly its unit revenue outlook, were strong, investors sold off shares. American closed Thursday at $43.98, down 5.3% from Wednesday's close. At one point Thursday, shares traded down 8.5%.

In premarket trading Friday, shares were down 0.3%.

And some analysts were taking another look.

Bernstein analyst David Vernon wrote Thursday that the market probably overreacted.

"The market should know (or will soon figure out) that AAL was going to take this salary increase at some point in the future," Vernon said. "So $930M of extra pay on a pre-announcement market cap of $23.3B equates to around a 4% hit to valuation," Vernon said. "The reaction should be in the 3-4% range.

"Short-term it is shareholder unfriendly," he said. "Long-term it is an investment in a primary input to the service product ... It is in reality a pull forward of an inevitable pay raise."

On Friday morning, Buckingham Research analyst Dan McKenzie raised his target price to $67 from $65 and reiterated a buy rating.

"We walked away from yesterday's call concluding the path back to better profitability is credible," McKenzie said. "Market wages {are} a cost of doing business."

McKenzie said total compensation for pilots was about 25% behind Delta and 17% behind United. Looking ahead, he said, "the pilots of the big four are tightly banded at market parity."

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McKenzie placed a value of $2.5 billion on initiatives that American President Robert Isom listed in response to a question McKenzie asked.

"We have both fleet and network simplification and optimization activities that are going on right now," Isom said, while adding basic economy fares "has legs throughout the system and it's just in its infancy.

"Premium economy will have tremendous benefits for our international network {as will} wide-body interior improvements," Isom said. "{Also} we have narrow-body density opportunities as well to pursue."

"We are just now getting started on our re-launch of our sales activity and bringing on a full force of sales reps that, quite frankly, has been lacking over the last three years as we focused on other things," Isom said. He also cited revenue management improvement and gains from American's frequent flyer and credit card cobranding programs.

One more point: The first quarter marked the third consecutive quarter when American's unit revenue performance was the best among the six largest carriers. "We expect to outperform the industry in the second quarter," Isom said.

Dennis Tajer, a spokesman for the Allied Pilots Association, which represents American pilots, said Friday, "Ironically some short-term investors were displeased with this early alignment of hourly pay rates to the industry standard. They ignored the powerful revenue catalyst that an engaged, enthusiastic and empowered pilot corps will be," Tajer said. "I've never heard of a company with low employee morale producing industry leading revenue and customer service."

Barclays analyst Brandon Oglenski wrote Thursday, "It is easy for Wall Street to throw stones from fortress Manhattan towers and denounce wage increases as giving away the 'upside.'"

"We humbly understand most folks working for a living, especially those in challenging front line customer service roles, all seek better pay and outcomes in life," he said.

Nevertheless, Oglenski cut his target price to $58 from $62 and also cut estimates. He has an equal-weight rating on the stock.

"While we are hopeful higher wages can generate goodwill with employees and thus better operational outcomes, we understand the market's initial negative reaction to American's actions," Oglenski said.

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Editors' pick: Originally published April 28.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.