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Why American Airlines Stock Jumped 6% Today

By Rich Smith - Oct 3, 2017 at 8:01PM

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The company's CEO bet a bottle of wine that American Airlines "will never lose money again."

What happened

Shares of American Airlines Group (AAL -3.04%) stock closed up 5.8% on Tuesday after an article in the Dallas Business Journal reported on the company's CEO making some uber-bullish comments about American Airlines' prospects.

Reporting on an investor presentation that American Airlines CEO Doug Parker gave last week, the Journal related the story of an email exchange between Parker and an analyst at investment bank UBS, in which Parker supposedly bet the analyst "a bottle of wine" that American Airlines stock would hit $60 a share before Nov. 25, 2018.

Airplane ascending

American Airlines' CEO's comments are giving its stock a lift. Image source: Getty Images.

So what

American Airlines stock closed today at $50.51 and with more than a year till its deadline -- so, to date, the bet has still neither been won nor lost.

Then why are investors getting excited right now? Perhaps because of the other thing Parker let slip at that investor meeting: that American Airlines isn't "ever going to lose money again" and that the airline industry as a whole is "going to be profitable in good times and bad."

Now what

Forget about the share price prediction. Those are some pretty bold claims American Airlines' CEO is making. After all, this is a company that filed for bankruptcy just six years ago and has lost money in two out of the past five years. Yet Parker is now promising investors that American Airlines will never lose money again -- let alone go bankrupt.

I don't know if time will prove the CEO right or wrong in his prediction. But just the fact that he feels confident in the near term to make the prediction is apparently enough to give confidence to investors as well.

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