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American Airlines Stock Plunges 59% in a Month: Here's Why

Zacks Equity Research
·2-min read

Shares of American Airlines AAL have lost 59.2% compared with the industry’s 56% decline in the past month.

American Airlines, like most other airline stocks, has been hit hard by the sharp drop in air-travel demand due to the coronavirus outbreak,which eventually dented its stock’s prospects.

Coronavirus-Led Woes Stunt American Airlines’ Growth

Due to the coronavirus-induced steep plunge in demand, American Airlines aims to cut international flights by 75% and domestic flights by 30% in April. In response to the extremely low-demand scenario, this Zacks Rank # 3 (Hold) Fort Worth, TX-based carrier suspended all its long-haul international flightsapart from the ones flyingto London Heathrow and Tokyo. The carrier trimmedits April schedule by more than 55,000 flights and decided to park approximately 130 widebody and 320 narrowbody planes. Further reductions are planned for May.

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With revenues being hurt due to extremely low passenger traffic, American Airlines is looking to cut costs to drive the bottom line. Evidently, the carrier halted its hiring process apart from offering pay-freeze options.  Moreover, the carrier decided to temporarily discontinue itsnew hire flight attendant classes.

In view of the massive slump in passenger revenues due to weak demand, it is natural that American Airlines’ financial position is being stressed. To bolster its liquidity position, the carrier recently secured a $1-billion loan. As a result, it currently has $8.4 billion of total available cash in hand.

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American Airlines apart, other carriers like Delta Air Lines DAL, JetBlue Airways JBLU and Ryanair Holdings RYAAY slashed capacity in the face of dwindling demand due to the global health hazard.

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JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
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Zacks Investment Research