American Airlines Group, Inc. (AAL) shares are taking flight on Thursday, soaring in tandem with Southwest Airlines Company (LUV). The catalyst behind this upward trend? Southwest’s optimistic outlook for its third quarter of fiscal year 2024, coupled with a significant share repurchase program.
In a filing with the Securities and Exchange Commission, Southwest revised its third-quarter guidance, projecting a 2% to 3% increase in revenue per available seat mile (RASM). This marks a significant improvement from the company’s earlier forecast, which anticipated RASM to be down 2% or flat. Adding to the good news, Southwest now anticipates economic fuel costs per gallon to fall between $2.50 and $2.60, a reduction from its previous estimate of $2.60 to $2.70.
The icing on the cake for investors is Southwest’s announcement of a $2.5 billion share repurchase program. The company’s Board of Directors approved the program, signaling their confidence in the airline’s strategic plan and its ability to generate revenue. These initiatives include balancing capital allocation priorities by minimizing aircraft expenditures and investing in infrastructure that optimizes operations.
Southwest stands as the largest domestic air carrier in the United States, while American Airlines boasts the title of the world’s biggest airline based on fleet size, capacity, and scheduled revenue passenger miles.
For those interested in gaining exposure to American Airlines stock, there are multiple avenues beyond traditional brokerage platforms. Exchange-traded funds (ETFs) that hold American Airlines shares provide a convenient and diversified approach, allowing investors to gain access to a basket of stocks within a particular sector. Alternatively, investors can consider allocating a portion of their 401(k) retirement savings to a strategy that targets investments in mutual funds or other instruments that hold American Airlines shares. Since American Airlines is categorized within the Industrials sector, ETFs that track this sector offer a broad approach to investing in this industry.
As of the time of writing, American Airlines stock is experiencing a 5.95% surge, trading at $11.64. The positive sentiment surrounding Southwest Airlines has undoubtedly propelled American Airlines’ stock price higher, demonstrating the interconnectedness of the airline industry.
