AAL - American Airlines: Strong Demand And Young Fleet Upgrading To A Buy

2024-05-22 06:47:01 ET

Summary

• American Airlines is expecting to see a continued strong demand for the foreseeable future.
• The slowing of the CPI price increase and delinquency rate growth supports the argument for a continued strong travel demand.
• American Airlines operates a young fleet leading to less Capex needs and flexible growth potentials.

Introduction

In my previous article covering American Airlines ( AAL ), I had a sell rating on the company. The primary reasoning behind this thesis was that I viewed the macroeconomic conditions unfavorably. As it is the case that the travel industry is cyclical and some macroeconomic data points like the rising delinquency rates were pointing towards a potential slowdown in consumer spending, I had a negative view of American Airlines. However, recent data points suggest that this may not be the case. Travel demand continues to be strong while the rate of delinquency growth that has been increasing is showing signs of deceleration....

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