American Airlines (AAL) will cancel about 1% of its flights in July in response to bad weather and labor shortages in some of its hubs. The airline expects the cut to offer an additional layer of resilience to its operations in the summer, even as it struggles with a significant uptick in demand, reports Reuters.
The cancellations are expected to impact a small number of customers. In addition, the airline will shift its focus to markets where it has multiple options for re-accommodations.
“(We) feel these schedule adjustments will help ensure we can take good care of our customers and team members and minimize surprises at the airport,” American Airlines said in a statement.
However, the flight cancellations come when the airline industry is seeing a significant increase in demand for air travel. Data from the U.S. Transportation Security Administration (TSA) indicates that up to 50 million people were registered for air travel in May, a 19% spike from April levels. (See American Airlines stock chart on TipRanks)
The aggressive COVID-19 vaccination programs across the U.S. have resulted in a significant reduction in travel restrictions. The lifting of restrictions provides the much-needed incentive for people to move around. However, the ramp-up in customer demand has coincided with bad weather, resulting in long delays in recent weeks. Some vendors at the airports were also struggling with manpower shortages, which also appear to be taking a toll on American Airline’s operations.
MKM Partners analyst Conor Cunningham initiated coverage of the stock with a Buy rating, and a $29 price target implies 30.1% upside potential to current levels.
Consensus among analysts is a Moderate Sell based on 2 Buys, 3 Holds, and 5 Sells. The average analyst American Airlines price target of $21.72 implies 2.56% downside potential to current levels.
AAL scores 3 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to underperform market averages.
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