American Airlines Group Plc. (NASDAQ:AAL) stock plummeted 4.46% as at 11:02 AM EST with the stock trading at $40.27. The company announced its traffic results for February 2016, and guidance that has confused the investors altogether.
The airline company announced that it expects passenger revenue per available seat mile (PRASM) to fall between 6-8% in the first quarter of 2016 year-over-year (YoY). Moreover, it expects the pretax margin to lie between 12-14%.
Given the ongoing trend where airline companies are benefiting from lower fuel prices and have benefitted tremendously in 2015, it could be expected that airline companies will take advantage of low fuel price in the short to medium term.
The future outlook of the airline industry is pretty impressive. In December, International Air Transport Association (IATA) announced that they predict a promising outlook for the airline industry in the near future. They stated that the aviation industry will register net profits of approximate $37 billion in 2016. Most profits are expected to come from the North American region.
The demand for the passenger travel shows a positive picture with expectation of an increase in demand this year. The demand is expected to increase 7% YOY. This is a huge boost for the airline industry to benefit from both, the positive demand and low fuel prices compared to weak market in 2014.