American Airlines' upbeat forecast lifts airline stocks

Reuters

Published Jul 12, 2017 01:00PM ET

American Airlines' upbeat forecast lifts airline stocks

By Arunima Banerjee

(Reuters) - U.S. airline stocks rose on Wednesday after American Airlines Group Inc (O:AAL) became the latest carrier to raise its estimate for per seat revenue over the past week.

Shares of the No.1 U.S. airline rose as much as 3.6 percent, while those of United Airlines Holdings Inc (N:UAL) were up 4.2 percent in afternoon trading.

Slowing capacity addition has helped airlines raise fares at a time when the U.S. economy is improving.

Unit revenue - which compares sales to flight capacity - is expected to increase by about 5 percent to 6 percent in the second quarter, compared with a 3.5 percent to 5.5 percent rise estimated earlier, American Airlines said.

"AAL currently faces the most difficult yr/yr RASM comp in our coverage universe, a topic that's been a significant focus of investor inquiry in recent weeks," JPMorgan (NYSE:JPM) analyst Jamie Baker said.

"Given the heft of today's guide, we expect these concerns to significantly moderate."

United Continental, the No. 3 U.S. airline by passenger traffic, said it expected a 2 percent rise in passenger unit revenue for the second quarter, compared with its previous forecast of 1 percent to 3 percent rise.

Last week, smaller rival Delta Air Lines Inc (N:DAL) also said it expected passenger unit revenue to be near the upper end of its second-quarter forecast.