Air ticket prices have fallen for four consecutive months! TD Cowen downgrades American Airlines to "Hold"
Air ticket prices have been falling for four consecutive months, and American Airlines' rating has been downgraded to "hold" with a target price of $10. Analysts say that the airline's significant discounts and oversupply in the market have impacted its earnings. In addition, American Airlines is also facing new flight attendant contracts and changes in the chief commercial officer, which may reduce its chances of free cash flow and shareholder returns. Forecasts show that domestic summer airfare prices in the United States are expected to decrease by about 6% year-on-year, reaching $315 per ticket, the first decline since 2020
According to the financial news app Zhitong Finance, investment bank TD Cowen has released a research report, downgrading the rating of American Airlines (AAL.US) from "Buy" to "Hold" and lowering the target price from $16 to $10.
Analyst Thomas Fitzgerald stated that airlines such as American Airlines have recently offered significant discounts, which are expected to impact their earnings. "Our research shows that with the decline in fuel prices, this airline has been actively discounting throughout the summer. American Airlines' network makes it more vulnerable to the current oversupplied market and unable to offset the higher cost environment," he warned.
Fitzgerald pointed out that the company also needs to finalize a new flight attendant contract and hire a new Chief Commercial Officer. He noted, "These factors may reduce the likelihood of generating free cash flow in the mid-term and opportunities for shareholder returns."
Data compiled by the U.S. Bureau of Transportation Statistics shows that airfare prices in May fell by 5.0% compared to the previous month, continuing the 3.6% decline in April, marking the fourth consecutive month of price decreases. Looking ahead, summer forecasts from booking app Hopper indicate that by August, domestic summer airfare prices in the U.S. are expected to decrease by about 6% year-on-year to $315 per ticket, the first summer airfare price decline since 2020. Earlier this month, Delta Air Lines noted that ticket prices across the industry are declining
