We recently compiled a list of the Top 10 Airline Stocks Benefiting From The Air Travel Boom. In this article, we are going to take a look at where American Airlines Group Inc. (NASDAQ:AAL) stands against the other airline stocks.
The aviation sector wasn’t short of optimism heading into the new year as air travel demand reached pre-covid highs and the holiday season showed promise. That optimism is now turning into reality as Delta Airlines announced its Q4 earnings result and surprised to the upside. The announcement has spurred a rally across airline stocks as expectations of other companies posting an earnings beat rise.
Delta reported improved operating margins of 12% vs 9.9% from a year ago. It improved the revenue per available seat mile from $0.1995 a year ago to $0.2004 in the last quarter. All of its international regions showed sequential improvement as revenue generated from international passengers grew at 6%. The company has also improved its guidance for the first quarter to $0.85 at the midpoint to the prior $0.76.
We now look at how this may affect other stocks across the industry.
A passenger jet taking off, representing the company’s commitment to air transportation services.
American Airlines Group Inc. (NASDAQ:AAL)
American Airlines is overhauling its fleet in 2025. It will receive the Airbus A321XLR jet this year and use it on its premium transcontinental and transatlantic routes. The jet will help the company improve its operations by flying to European markets in winter when the demand is low and rotating with the widebody jets for flights to Europe and Latin America.
The company also boats an exclusive Cobrand credit card partnership with Citibank. With this new deal, the airline won’t have to deal with Barclays anymore. Barclays was one of the partners in its previous credit card program together with Citibank. This will help the company get a better share of profits than before. The financial benefits of this deal may not become apparent in 2025 but the new relationship will gradually come into effect over the course of the year.
While high debt and lower earnings than its peers are a cause for concern, we believe it is priced into the stock as it is valued lower than the likes of Delta, Southwest, and United Airlines.
Overall AAL ranks 3rd on our list of the to airlines stocks benefiting from the air travel boom. While we acknowledge the potential of AAL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as AAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
