Should You Stay Away with American Airlines?

OVERVIEW

American Airlines Group Incorporation is a company based in the United States. The company offers air transport services to passengers and cargo around the world. The company operates over 860 airplanes and serves over 190 destinations both in the United States and around the world. The company was founded in 1930.

Why You Should?

  1. American Airlines has been hammered by the impacts that this pandemic has brought to the aviation industry. However, as restrictions start to get lifted, American Airlines will see a rise in demand for leisure travel as people go out and travel.
  2. American Airlines operates to many destinations around the world and has continued these networks through cargo-only flights. As e-commerce sales rise and as essential goods and products need to be transferred, American Airlines has seen a rise in air cargo demand. This has kept some of the revenue that the airline normally gets from passenger service.
  3. American Airlines will see another spike in leisure demand and a slow rise in business travel again as a COVID-19 vaccine gets distributed to the world. The hopes of a vaccine continue to rise as development continues to exceed expectations. This will cause the stock price of American Airlines to rise.
  4. American Airlines is the largest airline in the world, having the largest fleet size and transporting the most passengers before this pandemic. This strong network will benefit the company’s future growth after this pandemic is over. This will benefit the company and its investors.

Why You Should Not?

  1. The COVID-19 Pandemic has caused a drop in demand for passenger air travel as people are worried about contracting the coronavirus as well as government shutdowns and regulations closing borders to international travel. This as well as rising operating costs (cleaning, storing aircraft) have negatively impacted the company’s financial results and has also hurt investors.
  2. American Airlines is the worst airline stock to invest in now. One of the many issues with this stock is the high liability (over 60 billion dollars) tied with American Airlines. Delta and Southwest both have lower liabilities and also have higher profits compared to American Airlines.
  3. American Airlines faces tough competition from several other airlines around the world. Some US-based carriers include Delta and Southwest Airlines. Other airlines include the likes of British Airways, Singapore Airlines, and Lufthansa. All of these airlines compete with American on routes in a price-sensitive industry.

MY OPINION

In my opinion, I would invest in other airline stocks like Delta and Southwest compared to the likes of American Airlines because of how other airlines have adapted to the COVID-19 Pandemic, lower liabilities for these other airlines, and competition. However, American Airlines is still the largest airline in the world and a decent reopening play which will move higher with vaccine news and good air cargo demand.

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