Update: On August 27, 2019, American’s stock hit a new five year low.
This week American Airlines’ stock hit a three year low. Year-to-date the stock has decreased in value by 9%.
Today American’s stock closed at just over $28. For context:
- In June 2016 American’s stock hit $27, which is a five year low for the company
- In January 2018 American’s stock hit over $58, which is a five year high for the company
In late 2017 when American’s stock was in the high $40s, American CEO Doug Parker said the “stock is so undervalued it defies logic.”
American’s identity crisis
My goal in this post isn’t to beat a dead horse or to rag on American, so I won’t talk too much about American’s overall problem, which has led to the downward trend of their stock price.
But to sum it up very quickly, American has an identity crisis. They don’t know whether they want to be a full service airline or an ultra low cost carrier, so they’re trying to be everything to everyone… and it’s not working.
They trail the legacies when it comes to revenue per seat mile, and they can’t compete with ultra low cost carriers on cost. On top of that, management’s lack of vision has caused employees to largely become indifferent towards the company, rather than feel like they’re working towards a common goal.
American 737 MAX
American’s current problems
There are two things going on at American at the moment that are causing the carrier’s stock to do especially poorly, and that could cause it to slip even further.
American’s 737 MAX groundings
American has a fleet of 24 Boeing 737 MAX 8 planes. These planes have been grounded for a couple of months now, and we don’t know when the grounding will end. We know these planes won’t be back in service before June 2019 at the latest, though it could be much longer than that.
Obviously planes don’t make money when they’re sitting on the ground, and more importantly, this will have an especially big impact over the busy summer travel season.
American’s labor issues
While the 737 MAX issue is more of a temporary thing that should resolve itself, American’s labor issues are potentially a much bigger challenge for the carrier.
Labor can be a huge issue for airlines, regardless of whether the airlines are making or losing money:
- When airlines are making money, employees want raises and their fair share of the profits
- When airlines are losing money, employees understandably don’t want to sacrifice that much, especially when management is often still taking big bonuses
American has a rough several months ahead when it comes to their labor agreements:
- The contract with flight attendants becomes amendable as of December 2019
- The contract with pilots becomes amendable as of January 2020
- American is currently suing the union representing their mechanics, who are threatening a “bloody” battle against the airline
With so many contract negotiations coming up, and with Doug Parker having bragged about how the airline will never lose money again, something tells me these negotiations aren’t going to go well.
American 767
Bottom line
Unfortunately I doubt this will be the low point for American’s stock. Not so much because of the 737 MAX grounding (though it may lead to a disappointing summer for the airline), but more because I think this labor battle is about to get really ugly.
With so many contracts being negotiated at once, and with the lack of alignment between management and the unions, I just don’t see this ending well.
Do you think this will be a low point for American’s stock, or no?
Team Tempe needs to go before they completely destroy a proud legacy carrier with their cheap, regional carrier mentality.
I usually fly on the A321T. I think that’s the best aircraft that they fly out of SFO. I try to avoid flying the other aircraft that they fly out of SFO because the planes are so old. I agree that they are inconsistent. The service in January was terrible but a few days ago it was great. I also feel like they don’t know if they want to be low cost or if they want to be a legacy carrier.
It's a common mistake as a frequent flyer (yet alone a VALUE-hunting frequent flyer) to equate their experience on an airline with profitability and stock price. Spirit and Frontier offer poor products and are very profitable. United -- everyone's favorite major airline to hate -- has been increasing profitability here by NOT providing better product or service, but by tweaking its business plan to generate more revenue. Ironically, it's been Scott Kirby -- Doug Parker's...
It's a common mistake as a frequent flyer (yet alone a VALUE-hunting frequent flyer) to equate their experience on an airline with profitability and stock price. Spirit and Frontier offer poor products and are very profitable. United -- everyone's favorite major airline to hate -- has been increasing profitability here by NOT providing better product or service, but by tweaking its business plan to generate more revenue. Ironically, it's been Scott Kirby -- Doug Parker's former right-hand man and another airline executive that frequent flyers love to hate -- that's been behind United's impressive increase in profitability and stock price!
It's a bit difficult here to forecast AA's future profitability and stock price -- after almost 2 decades of remarkable success, Doug Parker has failed to meet his own financial forecasts the past year -- but I am 100% sure that Lucky's "happiness" with the airline is irrelevant to this equation.
I'm approaching 2 million miles with American and have been loyally flying them for decades. But I just have this feeling I'm committing to a losing venture and I just don't like the feel of AA anymore. My one recent trip where I was sent back to regular economy was unbearably awful. It makes me feel bad to sit on the same plane with people who are being treated like cattle.
The endless stream...
I'm approaching 2 million miles with American and have been loyally flying them for decades. But I just have this feeling I'm committing to a losing venture and I just don't like the feel of AA anymore. My one recent trip where I was sent back to regular economy was unbearably awful. It makes me feel bad to sit on the same plane with people who are being treated like cattle.
The endless stream of incredibly tone-deaf and market oblivious comments from their CEO reinforce this feeling. I don't want to be part of American as it swirls the drain. Luckily, United matched my EP status to premier 1K and I'm quite enjoying a new carrier.
Fire Doug Parker.
Airlines are airlines for the most part. Even ones with better reputations like Southwest have their "days". I work with a lady who was notified yesterday by Southwest that her flight today was canceled. No attempt to put her on a new flight, nothing.
When she tried calling it was going to be a 30 minute wait. Eventually she found something else on Southwest but since it was within the 24 hr check in time...
Airlines are airlines for the most part. Even ones with better reputations like Southwest have their "days". I work with a lady who was notified yesterday by Southwest that her flight today was canceled. No attempt to put her on a new flight, nothing.
When she tried calling it was going to be a 30 minute wait. Eventually she found something else on Southwest but since it was within the 24 hr check in time she lost the boarding number lottery and went from high B to mid Cs. Fortunately it is only a 2-3 hr flight but seems like they could have handled it better.
AA's tide is turning from being customer-focused to investor-is-king • Unbelievable that its version of the Max has no video system and the f/a staff is back to the manual safety announcement and no power ports
Pilots are almost ready for their next contract while AA has been dragging its feet on mechanic contract (going on 5 years overdue). Doea AA not get that planes need maintenance & repair?
Stock analyst or not, Lucky is pointing out fundamental issues at AAL that are driving down the price. The company’s earning are poor relative to its market peers operating in the same environment, and management doesn’t seem to have a cohesive plan to fix the problem. Parker’s guys are laying a lot of blame at the feet of the 737MAX, but the company was underperforming before the MAX problem and I expect AA will shift...
Stock analyst or not, Lucky is pointing out fundamental issues at AAL that are driving down the price. The company’s earning are poor relative to its market peers operating in the same environment, and management doesn’t seem to have a cohesive plan to fix the problem. Parker’s guys are laying a lot of blame at the feet of the 737MAX, but the company was underperforming before the MAX problem and I expect AA will shift that loss to Boeing and/or their grounding insurers. If the America West management can’t run this sprawling airline well in strong economic times, how bad is it going to get when the economy weakens and labor disputes start flaring. Meanwhile they’ve so mismanaged customer expectations and loyalty they seem to be the #1 airline people love to hate. The airline graveyard is full of famous old companies that went down the path AA seems to be following.
I agree with Lucky.No need to be a stock expert to see that AA stock will go much further down .However what will prevent it from going right down to the cellar is that:
1)AA is in a monopoly situation in a number of US airports.
2)AA still attracts some passengers with their free miles ,points etc(those who fly for their work and keep AA points& miles for their own flights)
@Steven M I haven’t, because SkyPesos, and their leading the race to the bottom with ideas like Basic Economy and award chart abolishment, and they and their partners just don’t go a lot places I want to. So I fly Delta even more rarely than American — I’m usually on United or JetBlue (or an international carrier).
However, when I’ve had customer service interactions with Delta via Twitter DM, they’ve been really stellar, so I...
@Steven M I haven’t, because SkyPesos, and their leading the race to the bottom with ideas like Basic Economy and award chart abolishment, and they and their partners just don’t go a lot places I want to. So I fly Delta even more rarely than American — I’m usually on United or JetBlue (or an international carrier).
However, when I’ve had customer service interactions with Delta via Twitter DM, they’ve been really stellar, so I can at least give them that.
It seems to me that Delta treats you well, but has an only-ok web site (and a good app), a so-so route network, and a nearly valueless rewards program. United treats you decently (at least if you’re an elite), has a powerful (though worsening) web site (and a good app), a wide route network, a good rewards program that they’re soon about to shred a la Delta; AA treats you badly, has a mediocre web site and app, a decent route network, and a decent rewards program save for not having a source of transferable points, which is a problem.
Which is just a long way of saying they all suck in their own special way, I personally find United to suck the least for my needs, but we will see how that changes after they burn their award chart.
What a bargain at 25$
Time to buy AA shares, simples!
AA needs new management. Out with the old.
IATA has already announced 737 Max will not fly again until August at the earliest. So, no good for Summer travel season.
It does not tell us a thing to know how far AA stock has fallen. The relevant number is how has it done in comparison to other airline stocks. AA's is the worst airline stock, but fan favorite Alaska Airlines has had a fall nearly as bad. Gee Ben, you want to write...
IATA has already announced 737 Max will not fly again until August at the earliest. So, no good for Summer travel season.
It does not tell us a thing to know how far AA stock has fallen. The relevant number is how has it done in comparison to other airline stocks. AA's is the worst airline stock, but fan favorite Alaska Airlines has had a fall nearly as bad. Gee Ben, you want to write a blog telling us how everything must be wrong with Alaska because of its stock drop?
All You people that complain about how poor American Airlines domestic first class is. Just remember in Europe domestic first class is an economy seat with an empty middle seat.
I'm liking it. The AAL Jan 2020 put options I bought in Jan 2018 with a strike price of $55 are doing quite nicely.
All the airlines with grounded 737 MAX can have plane's wings removed for the time being (untill they are ready to fly again). These planes with wings removed can be used to ferry passengers on highways.
At present these planes nay be dangerous to fly in skies but should be safe on national highways.
For long eighteen wheelers have been trying to get permission to be able to connect 4-5 trailer's to a...
All the airlines with grounded 737 MAX can have plane's wings removed for the time being (untill they are ready to fly again). These planes with wings removed can be used to ferry passengers on highways.
At present these planes nay be dangerous to fly in skies but should be safe on national highways.
For long eighteen wheelers have been trying to get permission to be able to connect 4-5 trailer's to a single tractor. So think of these planes (without wings) as one EXTRA long limousine. I am sure seats are going to be filled up to their 100 percent capacity.
It's better to make some money than to ground these planes.
"All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row."
Uh did you ever notice Delta would love for you to redeem your SkyPesos on partner airlines, where the seats you may choose...
"All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row."
Uh did you ever notice Delta would love for you to redeem your SkyPesos on partner airlines, where the seats you may choose from are restricted to the rear of the aircraft. In addition, Delta is thrilled when you redeem your SkyPesos for basic economy seats and all the joyless restrictions they involve.
Just saying.
Time to make some changes at AA.
I’ve been a loyal AA EP for several years. I’ve always paid more to fly AA and keep my EP status.
EP status no longer is very valuable and since I pay for my tickets, not my employer, I do not spend sufficiently to become a Concierge Key.
Only Concierge Key gets diferencial treatment these days.
Because of that, this is my last year with AA, I now have become a whore...
I’ve been a loyal AA EP for several years. I’ve always paid more to fly AA and keep my EP status.
EP status no longer is very valuable and since I pay for my tickets, not my employer, I do not spend sufficiently to become a Concierge Key.
Only Concierge Key gets diferencial treatment these days.
Because of that, this is my last year with AA, I now have become a whore of the skies and fly with any airline I can get a better seat for a cheaper price.
I wish Parker was long gone.
Identity crisis case in point:
American's 777 business class is a wonderful premium product, but in regular economy they went 10 across with 17 inches of seat width, which would be torture on a long haul flight.
Delta's 777 business class is also premium (albeit I believe American has the slight edge), but in regular economy they went 9 across with 18.5 inches of seat width.
Delta clearly wants to offer a more...
Identity crisis case in point:
American's 777 business class is a wonderful premium product, but in regular economy they went 10 across with 17 inches of seat width, which would be torture on a long haul flight.
Delta's 777 business class is also premium (albeit I believe American has the slight edge), but in regular economy they went 9 across with 18.5 inches of seat width.
Delta clearly wants to offer a more premium product across the board and look at their stock price versus American's. I know there are other factors involved, but if all the flying public wants is a cheap seat then why is Delta's stock MUCH higher than American's?
Premium product, reliability, happy/engaged employees and customers is a winning formula. American is just floundering right now.....
You are all over the map, Lucky. Leave the stock analyst job to the pro.
@eskimo Yes, the thorough stock analyst was talking a few days ago about the superconvenience of buying life miles :), obviously with a certain benefit for his side. It seems currently lifemiiles don't allow to perform partner redemptions on Avianca site (glitch? , cash desperate need publicly advertised and promoted here?)
Just hope no one does market or personal economy relevant decisions based in...[complete as desired]
Don't you just love it when bloggers become stock analyst.
I don't think a movie blogger thinks the show sucks therefore knows why Netflix shares jumps or tanks.
Or a fashion blogger thinks Nike shares will drop cause his shoe doesn't fit well.
And for sure my beer buddies thinks Budweiser stock will flop because his beer isn't cold enough.
You are beating a dead horse. Same as blaming Netflix that Fuller...
Don't you just love it when bloggers become stock analyst.
I don't think a movie blogger thinks the show sucks therefore knows why Netflix shares jumps or tanks.
Or a fashion blogger thinks Nike shares will drop cause his shoe doesn't fit well.
And for sure my beer buddies thinks Budweiser stock will flop because his beer isn't cold enough.
You are beating a dead horse. Same as blaming Netflix that Fuller House sucks, blaming Nike for bad fit, and thinks the brewery will go bankrupt for not having cold beer.
Never saw Warren Buffet write a blog.
You are beating AA for identity crisis. Their share happens to tank but not because of identity issues, but Doug Parker sucks.
(Tiffany, could you please delete my double post -- thanks)
I appreciate the hard work AA does to make United look good.
All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row. If I didn't want to pay for that, the app explicitly...
I appreciate the hard work AA does to make United look good.
All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row. If I didn't want to pay for that, the app explicitly said I needed to print a security clearance at an airport kiosk and get an assignment at the gate. The kiosk line at PHX was at least 100 deep and if I hadn't been Gold, I never would have made the flight.
They should have either assigned me one of those garbage seats in the back they were trying to sell me, or given me an electronic security clearance, or warned me prior to purchase along with the other Basic Economy deterrents that interacting with a kiosk might be required. Not doing any of those is punitive and deceptive.
When I wrote customer service to say as much, I got back a form letter explaining how Basic Economy works, including a claim that seats are assigned during check-in (which obviously wasn't true, or I wouldn't have written). When I responded and asked them to read my actual letter, I got no response. When I submitted another note, I got no response. I tried one more time, and someone actually called me up and heard me out.
Unfortunately, they literally did not understand what I was describing. They had no idea how Basic Economy works. They just kept saying that they'd click the box saying that I didn't like Basic Economy. I said, "I don't dislike Basic Economy. That's not why we're talking. I have a problem with not assigning me seats I am entitled to, and being forced to interact with an airport kiosk for no reason and without warning." She just didn't get it, at all, and I eventually gave up and resolved to avoid AA when reasonable alternatives are available.
I've never had such terribleness from United. They screw up, sure, but then their representatives usually make it right, in my experience, and don't express such manifest cluelessness about their own product.
I appreciate the hard work AA does to make United look good.
All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row. If I didn't want to pay for that, the app explicitly...
I appreciate the hard work AA does to make United look good.
All I needed to know about American was earlier this year, when both their site and mobile app refused to give me a seat assignment on a Basic Economy reservation during check-in, as they are supposed to. But they were happy to sell me an assignment in the second to last row. If I didn't want to pay for that, the app explicitly said I needed to print a security clearance at an airport kiosk and get an assignment at the gate. The kiosk line at PHX was at least 100 deep and if I hadn't been Gold, I never would have made the flight.
They should have either assigned me one of those garbage seats in the back they were trying to sell me, or given me an electronic security clearance, or warned me prior to purchase along with the other Basic Economy deterrents that interacting with a kiosk might be required. Not doing any of those is punitive and deceptive.
When I wrote customer service to say as much, I got back a form letter explaining how Basic Economy works, including a claim that seats are assigned during check-in (which obviously wasn't true, or I wouldn't have written). When I responded and asked them to read my actual letter, I got no response. When I submitted another note, I got no response. I tried one more time, and someone actually called me up and heard me out.
Unfortunately, they literally did not understand what I was describing. They had no idea how Basic Economy works. They just kept saying that they'd click the box saying that I didn't like Basic Economy. I said, "I don't dislike Basic Economy. That's not why we're talking. I have a problem with not assigning me seats I am entitled to, and being forced to interact with an airport kiosk for no reason and without warning." She just didn't get it, at all, and I eventually gave up and resolved to avoid AA when reasonable alternatives are available.
I've never had such terribleness from United. They fuck up, sure, but then their representatives usually make it right, in my experience, and don't express such manifest cluelessness about their own product.
The markets have spoken. AA very senior Management sucks.
Next recession or strike this stock goes MUCH lower.
Lest not forget the major devaluation they had a while back and the lack of availability of award seats AA used to enjoy prior to its marriage with USAir. All this caused major part of the loyalists to abandon the program and the airline.
I would absolutely not fly the 737MAX on any airline! Boeing CEO didn't want to ground them in the US (tried to convince Trump), bc it is money first, after 2 crashes and knowing of the problem, he is a slime! Just recently, Trump suggested that the 737 MAX get renamed? Another slime!!
With these untrustworthy slimes, no, I am not flying on the 737MAX! Although, I may rethink my position if the 737MAX...
I would absolutely not fly the 737MAX on any airline! Boeing CEO didn't want to ground them in the US (tried to convince Trump), bc it is money first, after 2 crashes and knowing of the problem, he is a slime! Just recently, Trump suggested that the 737 MAX get renamed? Another slime!!
With these untrustworthy slimes, no, I am not flying on the 737MAX! Although, I may rethink my position if the 737MAX can go 10 years flying without crashing due to design or sw.
As for AA stock, watch out below bc we are on the cusp of a major market correction!
BTW - The Boeing CEO needs to ball up and start flying to his company meetings and personal use on the 737MAX and show to everyone that it is safe. It may takes years to convince the public, but at least he would be putting his money where his mouth is!
-Software Engineer
@Lucky
Do you plan to fix the issue where comment counts no longer link to an article's comments? It's incredibly annoying to have to scroll through posts (especially larger ones) when we want to visit the comments.
@ DB -- Yes.
I think you're conflating two issues. AA's identity for customers and their ability to have a good stock price. They might be somewhat related but a shitty airline can have an amazing stock price if they are making money and a great airline can be a dumpster fire for investors.
BUT, I will say the reason they are bad at both is management. A good financial manager could run an uncomfortable airline but the...
I think you're conflating two issues. AA's identity for customers and their ability to have a good stock price. They might be somewhat related but a shitty airline can have an amazing stock price if they are making money and a great airline can be a dumpster fire for investors.
BUT, I will say the reason they are bad at both is management. A good financial manager could run an uncomfortable airline but the issue here is AA is bad at both. It's not making great money, the future is unstable and they have a poor product. That's on the current management.
They won't lose their jobs because they removed an inch of legroom and the bathroom is unusable. But they will because the stock price is tanking. MAYBE a better manager of finances can do a better job of running the airline, but we don't know that for sure. Regardless, Parker needs to go.
should have bought more at 35c a share when it first announced bankruptcy back 2011ish ;)
I guess that means AA CEO Doug Parker's salary is at its 3-year lowest too since he's paid entirely by AA stock.
Ugh. Wish the UA/AA merger happened instead of US. Sigh.
Price of fuel for jets and ground support equipment has risen. Many weather related issues this past winter and spring. Lots of competition from low cost carriers have also contributed in decreased airline profits.
Kind of like Marriott, I think American had gotten too big to control employee morale and have lost their culture. All decisions come from the top, and I believe Dougy P needs to go. While I don’t like Delta’s dynamic pricing on awards, it sure seems American is going that way too. Delta will surely win every time then (no real reason to fly American, pending you have a choice).
Just got back from...
Kind of like Marriott, I think American had gotten too big to control employee morale and have lost their culture. All decisions come from the top, and I believe Dougy P needs to go. While I don’t like Delta’s dynamic pricing on awards, it sure seems American is going that way too. Delta will surely win every time then (no real reason to fly American, pending you have a choice).
Just got back from Paris on American- flight over was terrible and the crew so rude. Coming back, the crew was fantastic. I can’t figure out how they can have such inconsistency.
Airline leadership expert and now a stock analyst. You know it all!
I agree with the "identity" problem. I've flown AA for 30 years and now to see them playing the luggage game, the seat game, all the things that the airlines I've avoided do...and it's not like their prices are lower for it.
"American has an identity crisis. They don’t know whether they want to be a full service airline or an ultra low cost carrier, so they’re trying to be everything to everyone… and it’s not working."
Yup exactly right. Was thinking about this on the 787 service Buenos Aires - LAX last week.
American is two different airlines, maybe even three.
These long-haul 787 flights are always great. And the coast-to-coast 321 service as well.
But everything else is so meh.
We know these planes won’t be back in service before June 2019 at the latest
Should be earliest!
Lucky -When the 737 Max eventually gets re-approved, would you hesitate to fly?