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American Airlines Is Flying High

By Daniel Kobialka – Mar 3, 2014 at 3:20PM

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American Airlines' capacity and passenger traffic are on the rise, which could influence the airline's stock.

American Airlines (AAL 1.93%) prides itself on providing cheap, high-quality flights, which has helped this airline boost its profits. But American's short-term gains are merely a sign of things to come -- this airline could see its revenue soar over the next few months.

Why should investors consider the benefits of investing in American over other airlines like United Continental Holdings (UAL 1.24%) or Southwest Airlines (LUV 2.26%)? Here are three reasons why American is poised to reach new heights:

1. A strong reputation
American recently announced that it's capacity and passenger traffic increased last month. More passengers likely means more profits for American, and American officials anticipate that the airline's revenue will increase between 2% and 4% during the first quarter of 2014. American already has a reputation among airlines strong enough to bolster its profits in the near future, especially as it introduces new incentives for passengers and employees.

Currently, American offers various incentive programs -- everything from individual incentive flight certificates for both customers and employees to reward miles for frequent flyers. In addition, flyers should expect world-class customer service from American employees who want to earn bonuses. American introduced a new employee incentive program this month that awards workers up to $150 per month if they perform better than competitive airlines such as United and Southwest, neither of which offer programs that come close to American's Ops Olympics. This American Airlines program could help American further improve its global reputation, and may put pressure on United, Southwest, and other airlines to step up to the plate and improve their customer service and employee incentive programs.

While American is searching for ways to improve its flights, United and Southwest are cutting back on its flights, which could hurt both of them in the long run. United recently announced it will cut back on flights from its Cleveland hub, one of several cost-cutting measures for the airline. Southwest, on the other hand, announced in December 2013 that it would stop its non-stop departures from Chicago, Dallas, and Houston. 

2. Reorganized flights
According to The Wall Street Journal, American changed its flight schedule recently, and expects to earn about $400 million thanks in part to its modifications. This airline reorganized flights out of Chicago, Dallas, and Miami, and the changes could have far-flung effects on its operations for years to come.

American is on a mission to further enhance its flights as well. Over the course of this year, this airline has "a list of probably 100 items" it will use to boost its revenue, company president Scott Kirby told the Journal

With reorganized flights, American could become more productive and efficient, and further distance itself from United, Southwest, and other rivals. American also is the the largest carrier with the highest offering of premium seats, which gives it yet another competitive advantage as well.

3. VIP support
Every flyer wants to be a VIP, and American is taking steps to make sure every passenger gets the support she deserves. American offers VIP service at more airports than any other airline, a key difference that could play a role in its success over the next few years.

American's VIP services allow this airline to connect with high-value clients such as first-class and business-class travelers. The services include personal escorts for departures, priority check-in, and streamlined security and immigration processing and other top-notch amenities to make flying more enjoyable than ever before.

American is only one of 14 airlines worldwide to offer such services. Southwest currently does not offer such services, while United merely provides VIP baggage delivery services only. American's VIP services help this airline further differentiate itself, and helps it remain an attractive choice to travelers. 

It's easy to see why American has been able to increase its capacity and passenger traffic. And now, it might be the right time to invest in this airline, especially as it rolls out new incentive programs for customers and employees. In fact, by investing in American, stockholders may see their profits go sky high in the near future.

Daniel Kobialka has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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