Risk should map to an observable signal
| Risk | Signal | Interpretation rule |
|---|---|---|
| fuel spikes | TRASM vs CASM ex fuel | Escalate when the signal persists and changes underlying economics |
| labor inflation | fuel expense | Escalate when the signal persists and changes underlying economics |
| operational disruptions | debt reduction | Escalate when the signal persists and changes underlying economics |
| aircraft delivery delays | operational reliability | Escalate when the signal persists and changes underlying economics |
| high leverage | aircraft deliveries | Escalate when the signal persists and changes underlying economics |
| recession/travel shocks | premium and loyalty trends | Escalate when the signal persists and changes underlying economics |
Macro transmission
GDP and business travel, jet-fuel prices, interest rates, consumer discretionary spending and geopolitical disruptions strongly affect results.
Thesis breakers
- Persistent deterioration in TRASM that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in CASM ex fuel that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in load factor that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in yield that is not explained by seasonality or a temporary cycle.
- Persistent deterioration in available seat miles that is not explained by seasonality or a temporary cycle.
Quarterly monitoring checklist
- TRASM vs CASM ex fuel
- fuel expense
- debt reduction
- operational reliability
- aircraft deliveries
- premium and loyalty trends
References
- American Airlines Investor Relations: https://americanairlines.gcs-web.com/
- American Airlines SEC filings: https://www.sec.gov/edgar/browse/?CIK=6201&owner=exclude
- Nasdaq Composite Index overview: https://indexes.nasdaq.com/Index/Overview/COMP
- Nasdaq Composite Index Methodology: https://indexes.nasdaq.com/docs/methodology_COMP.pdf