Company Overview

Zacks Rank #5 (Strong Sell) stock American Airlines (AAL) serves as a premier commercial airline in the United States offering travel options for both passengers and cargo. Being among the top airlines globally, it runs a system of flights within the country and abroad, linking various cities worldwide. The company provides travel services such as flight bookings, onboard facilities, and loyalty programs for flyers. Recognized as a player in aviation, American Airlines stands out for its aircraft fleet and its contributions to both the leisure and corporate travel sectors.

Air Travel Reaches Record Highs Yet Airlines Sink

According to TSA data, seven of the top U.S. airline travel days in history have occurred this year. In other words, travel has increased dramatically in recent years to supersede pre-pandemic levels. However, the troubling thing for AAL investors is that earnings have stagnated and the stock is testing the 2020 panic lows. With the economy showing signs of weakness, investors should be concerned about how much worse things can get.

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CrowdStrike Outage

Software security solution company CrowdStrike Holdings (CRWD) caused mayhem in the airline industry due to an outage. Thousands of flights were cancelled and the outage was evidence of just how centralized the U.S. travel industry is. Though AAL was hit on the news, investors won’t understand the full impact of the disruptions until the company reports earnings at the end of August.

Geopolitical Concerns May Drive Fuel Prices Higher

Though oil prices have been elevated since the COVID-19 outbreak, they have oscillated in a range for several months. However, several geopolitical hotspots are heating up, including threats in the Middle East between Israel and Iran, Ukraine and Russia, and possibly Taiwan and China.

Jobs Numbers Plunge

The latest jobs report by the U.S. government fell far short of Wall Street’s expectations. Employers added just 114k jobs in July, compared to the 175,000 economists estimated. Meanwhile, global equity markets are crashing over the weekend as Japan’s stock market plunges. A weaker economy and jobs market is a net negative to an already struggling industry.

Bottom Line

Despite being a leading player in the airline industry, American Airlines faces significant challenges such as travel disruptions and macroeconomic concerns.

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