American Airlines: A Buy Opportunity Amidst Industry Turmoil?

As the aviation industry grapples with the ongoing impact of the COVID-19 pandemic, American Airlines (AAL) has been one of the hardest-hit carriers. However, with the recent announcement of a strategic alliance with JetBlue and a strong analyst consensus, is AAL a buy opportunity amidst the industry turmoil? Let's delve into the data and expert opinions to explore this question.



Financial Performance and Analyst Ratings

American Airlines reported a net loss in the 3rd quarter of 2024, while its competitors, on average, reported income increases of 24.43%. This suggests that AAL's net income has not improved as much as its competitors' in the past year. However, it's essential to consider that the entire aviation industry has been significantly impacted by the pandemic.

In terms of revenue growth, American Airlines reported a 1.22% year-on-year increase in the 3rd quarter of 2024, which is slower than the average revenue growth of 2.47% achieved by its competitors in the same quarter. This indicates that AAL's revenue growth has been slower than its competitors' in the past year.

Despite these challenges, the average analyst rating for AAL stock is "Buy," with a 12-month price forecast of $18.05, which is an increase of 4.15% from the latest price. This suggests that analysts believe AAL is likely to outperform the market over the next twelve months.



Strategic Alliance with JetBlue

American Airlines' strategic alliance with JetBlue, known as the Northeast Alliance (NEA), has significantly impacted its competitiveness and customer experience in the Northeast market. The NEA has led to an increase in the number of flights and destinations served by both airlines, improved connectivity, and a better customer experience. This alliance has given AAL and JetBlue a competitive edge in the Northeast market, allowing them to better compete with other major carriers.

Expert Opinions

Several analysts have expressed their views on American Airlines' prospects. Savanthi Syth, an analyst at Raymond James, has a Buy rating on AAL and a price target of $24. She believes that the airline's strong balance sheet and liquidity position will help it navigate the current challenges and emerge stronger once the pandemic subsides.

On the other hand, Andrew Didora, an analyst at B of A Securities, downgraded AAL to a Sell rating in January 2025, citing concerns about the airline's financial performance and the impact of the pandemic on the aviation industry. However, he later upgraded the stock to a Hold rating in January 2025, indicating a more optimistic outlook.



Conclusion

American Airlines has faced challenges in maintaining its financial performance compared to its competitors in the past year. However, the airline's strategic alliance with JetBlue and strong analyst consensus suggest that AAL may be a buy opportunity amidst the industry turmoil. While the pandemic has had a significant impact on the aviation industry, American Airlines' strong balance sheet and liquidity position, as well as its strategic alliance with JetBlue, may help it navigate the current challenges and emerge stronger in the long run. However, investors should carefully consider the risks and uncertainties associated with the ongoing pandemic and the aviation industry before making any investment decisions.