Results From American Airlines and Alaska Air Bolster 2 Portfolio Holdings
Airline spending is an indicator of larger travel expenditures.
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Building on quarterly results and favorable outlooks issued by Delta Air Lines DAL and United Airlines UAL, this morning’s December quarter results and guidance from American Airlines AAL bring further support for travel-related spending and our positions in American Express AXP and Mastercard MA.
During its earnings conference call, American’s management made the following comments, bringing more confirmation to our thinking:
"Passenger revenue strength throughout the fourth quarter was broad based. In the fourth quarter, American's year-over-year domestic Atlantic, Pacific, and total passenger unit revenue results led US network carriers.
"Premium revenue increased approximately 8% year-over-year. Paid load factor in our premium cabins remains historically high and was up 3 three points year-over-year, with strength in both domestic and international.
"… forward bookings continue to show strength into the first quarter."
As we discussed yesterday, airline spending is a favorable indicator for additional spending on other travel spending, including dining, accommodations/hotel, and other transport such as Uber UBER or Lyft LYFT.
In addition to American’s results and comments, we have additional support in quarterly results from Alaska Air ALK, which sees its Revenue per Available Seat Mile up high-single digits in the current quarter.
These and other data about holiday spending and favorable outlook for consumer spending point to favorable network volumes when American Express reports tomorrow. Based on those results and what see in terms of card membership data, we’ll revisit our AXP price target. As we do that, we’ll be mindful of what Amex’s results signal for Mastercard’s December quarter results next week.
At the time of publication, TheStreet Pro Portfolio was long AXP and MA.
