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Why American Airlines Group Stock Dropped 10.9% in March

By John Ballard – Apr 6, 2019 at 7:23PM

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Higher fuel prices hurt profitability last year, and analysts don't see the situation improving in 2019.

What happened

Shares of American Airlines Group (AAL 1.57%) lost 10.86% in value last month, according to data from S&P Global Market Intelligence.

Last year was a tough one for American Airlines, as higher fuel prices pressured profits. Toward the end of 2018, oil prices pulled back, but some analysts are concerned that this will encourage airlines to discount airfares to compete, which could pressure profits in 2019. One analyst downgraded the stock last month, citing a lack of growth catalysts to improve profits this year. 

A passenger aircraft flying above the clouds.


So what

These concerns have weighed on stock prices of other major airlines, too. However, the sell-off may be overdone, as management expressed optimism about its performance heading into 2019 during the fourth-quarter conference call. 

American Airlines has invested $25 billion over the past five years in its team, product, and fleet, which management boasted is the largest investment by any carrier in the history of aviation, and which should drive growth for shareholders. 

Now what

Management expects those investments to pay off through a more reliable and consistent service for customers, including new perks such as live television for international flights and upcoming new features such as high-speed Wi-Fi and in-seat power for mobile devices. 

American is also continuing to expand its network with new routes, including new flights to areas such as Tuscany, Berlin, and Croatia out of the Philadelphia hub -- all of this while focusing on generating high margin and earnings growth for investors. 

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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