American Airlines (AAL) apparently will become the first major airline in about two years to report positive quarterly unit revenue.
American said Wednesday it expects fourth-quarter 2016 total revenue per available seat mile (TRASM) to be flat to up 2% year over year. Additionally, it said its fourth-quarter pretax margin excluding special items will be between 7% and 9%.
TRASM has improved from prior guidance of between down 1% and up 1%, and pretax margin has improved from prior guidance of 6% to 8%, due primarily to improving yields on ticket sales, American said.
Shortly after the opening bell Wednesday, American shares were up 1.7% to $49.31 and have risen about 5% year to date.The world's largest carrier issued its December traffic report at a time when Wall Street has ramped up the enthusiasm for airline stocks due to unit revenue trends, limited planned capacity growth and the potential for more rapid GDP growth.
However, unless revenue can increase, margins may start to decline due to higher costs for fuel and labor.
On Wednesday morning, the airfare prediction app Hopper said average domestic January fares will be up 8% from January 2016 and will continue to climb over the next six months.
On Thursday, the industry's attention will turn to guidance and results from Delta (DAL) , which will be the first carrier to report fourth-quarter earnings.
Major airline unit revenue has been in decline for about two years, as generally lower fuel prices led to lower fares, leading to lower revenue.
November unit revenue was flat, due to a calendar shift that brought more Thanksgiving traffic into November, but December produced an industry decline of about 2%. Until November, domestic revenue had declined for 19 consecutive months and international unit revenue had declined for 30 consecutive months.