American Airlines' Cost Trajectory May Be About to Improve
After briefly becoming one of the most profitable airlines in the world during 2015, American Airlines (NASDAQ: AAL) suffered severe margin erosion in the following years. A modest rebound in fuel costs drove some of this margin pressure, but rising nonfuel unit costs represented an even bigger headwind.
American Airlines' adjusted nonfuel unit costs came in at 9.4 cents in 2014. Based on American's 2018 cost performance and 2019 guidance, adjusted nonfuel unit costs will reach 11.5 cents this year. That would be up 22% compared to 2014, a compound annual growth rate of 4% over five years. (For comparison, most U.S. airlines try to limit annualized nonfuel unit cost growth to 2% or less.)
However, the Boeing (NYSE: BA) 737 MAX grounding has exacerbated American Airlines' unit cost inflation this year. The 737 MAX's return -- expected in early 2020 -- could spark a change for the better in American Airlines' unit cost trends over the next few years.
Source Fool.com
