It’s never a good sign when businesses raise prices without offering some kind of new service or benefit along with it. American Airlines (NASDAQ:AAL) is about to discover that, as this airline stock slumped fractionally in Tuesday morning’s trading thanks to its plan to raise prices. More specifically, American is hiking fees to check bags. To its credit, this is the first time in five years it’s carried out such a hike, raising the price for the first checked bag to $35 if purchased in advance. The price goes to $40 when checking the first bag at the airport.
Previously, a bag could be checked at any time for just $30. Those wanting to check a second bag, meanwhile, will see that price jump to $45, regardless of when they purchase the option. That’s bad news enough, but it gets worse; American is planning to limit which travel agencies and other options are eligible to get frequent flier miles, a move designed to push traffic to the American website.
It’s Not All Bad News, Though
There are some silver linings in this new dark cloud of extra fees. First, American is reducing the fees on slightly overweight baggage; those who find their bag three pounds over a 50-pound limit will instead pay $30. Previously, it was $100. This comes at a time when American is stepping up its lobbying efforts connected to credit card swipe fees.
Is American Airlines a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AAL stock based on nine Buys, three Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 6.82% loss in its share price over the past year, the average AAL price target of $17.86 per share implies 21.17% upside potential.
