American Airlines stock has plummeted. The price of fuel is way up. The markets haven’t liked their big capital expenses, in new aircraft and facilities.
Their third quarter earnings call is scheduled for the morning of Thursday, October 25. And they need to walk in with a narrative Wall Street might like.
Fares need to be up, recouping much of the cost of increased price of fuel. American provided guidance that they expect revenue to be up 2% – 3% year-over-year, in the upper end of the range they had previously provided, with fuel costs to be up slightly more than previously projected.
There’s no mission statement at the airline and they don’t talk about ‘going for great’ anymore, so the strategy has seemed amiss.
Take New York JFK for instance. Four years ago they were about bringing passengers to New York rather than serving the New York market. They timed their flights so that people arrived in the morning and left int he evening. Now they say they’re a boutique airline serving business customers in New York, albeit without flying to places business customers need to go like Zurich and Frankfurt.
American Airlines Terminal 8 New York JFK
The airline is in a bit of a pickle. They can point to last month’s layoffs, though they’ve also argued that’s really just implementing what had been announced in June. Either it’s a new cost-saving measure or it isn’t.
Doug Parker has maintained for several years that ‘this time is different’ so when a downturn comes they will not alter their strategy because ‘they’re investing for the long haul.’
JonNYC thinks there will be route cuts.
one hears rumors of hub Realignment with some Hubs getting "Rightsized". Not sure what this means but wouldn't be be CLT, rather DFW or LAX.
— JonNYC (@xJonNYC) October 12, 2018
I suspect there will be deferrals of capital investment, which they can bundle together with previous aircraft deferments to get to a large savings number. That way they can say they’re doing something not just about profitability but also cash flow.
Unless AAL stock recovers significantly in the next 10 days it seems like this could be a big earnings call because management needs a message.