Airline tickets have fallen for four months in a row! TD Cowen downgraded the rating of American Airlines (AAL.US) to "Hold"
Cowen & Co. released a report, downgrading American Airlines (AAL.US) to "hold" from "buy" and lowering its target price to $10 from $16.
Analyst Thomas Fitzgerald said that airlines like American Airlines have recently slashed fares sharply, which is expected to impact earnings. "Our data shows that the airline has been aggressively discounting throughout the summer as fuel prices have fallen. Its network makes it easier to be impacted by the current oversupply market and unable to offset the higher cost environment," he warned.
Fitzgerald noted that the company also needs to hammer out a new labor contract and hire a new chief commercial officer. "These factors could push down the likelihood of generating free cash flow in the near term and the opportunity for shareholder returns," he said.
According to the Bureau of Transportation Statistics, round-trip domestic airfares fell 5.0% month-on-month in May, extending the 3.6% decline in April, marking four consecutive months of decline. Looking ahead, Hopper's summer forecast shows that domestic summer airfares in the U.S. are expected to decline by about 6% to $315 per ticket by August, marking the first time summer airfares have fallen since 2020. Earlier this month, Delta Air Lines noted that fares across the industry are down.