Keeping with the trend seen last year, in January 2017, American Airlines continued to grow its capacity in small amounts. While domestically, the capacity was up 0.8%, the company pared its capacity in all international markets, barring Atlantic. The reduction in capacity internationally is likely an effort to control the negative headwinds its unit revenues are suffering from in the region, and manage the excess capacity that has been built into the system. The 110 bps decline in load factor in January is indicative of this excess capacity.
In terms of unit revenues, American expects a rise in the amount of 2.5% in the first quarter of 2017. This is attributable to the capacity discipline the company has been practicing on international routes and the improvement being seen in yields, especially Latin America.
However, the revenue passenger miles and the number of passengers boarded continued to decline in the month. This doesn't bode well for the airline, and may impact its top line negatively. Further, the management said that it expects its pre-tax margin for the first quarter to be in the 3%-5% range, due to higher operating costs and tax expense.
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