Shares of American Airlines Group (AAL 1.16%) gained 11.5% in October, according to data provided by S&P Global Market Intelligence. American has been the laggard among major U.S. airline stocks so far in 2019, but third-quarter results and guidance gave investors reason to hope the worst is behind it.
American has been hard-hit by turbulence, impacted by the grounding of Boeing's 737 MAX while also dealing with labor woes. But the company still managed to report third-quarter earnings that beat expectations by $0.03 per share, and passenger revenue metrics in the quarter grew faster than expenses.
Wall Street has been skeptical about American, with shares trading down more than 20% heading into October, due to the number of challenges the airline faces. But on a post-earnings call with investors CEO Doug Parker addressed many of the concerns, pledging to "ensure that Boeing shareholders bear the cost of Boeing's failures, not American Airlines' shareholders," when it comes to the MAX. Parker also said he's seen "significant improvements" to operations now that negotiations with key labor groups have resumed.
American is also dealing with an industry-high debt burden, but said it expects adjusted debt to fall by up to $4 billion over the next two years and by up to $10 billion over the next five years. The airline is also implementing new revenue management policies and systems that should help it extract higher fares over time.
American Airlines appears to be on the right course, but it will take some time to reach its destination. Despite its progress the airline remains highly leveraged, tied to the 737 MAX, and at odds with key labor groups.
American's shares have hopefully bottomed out, but until its issues are behind it there are better airline stocks to buy right now.