American Airlines faces pressure to close margin gaps with peers as 1Q2017 margins are squeezed

American Airlines' unit revenue outperformance versus its large global US airline peers in 4Q2016 was overshadowed by concerns about the airline's projected unit cost inflation for 2017. American is joining most US airlines in battling rising unit costs while attempting to rebuild unit revenues that have languished in negative territory during the last couple of years.

The company believes its cost pressure should ease in 2018 as it completes the final stages of its merger integration with US Airways and undertakes a review of its cost structure post integration. The airline has not set any definitive cost targets, but has aspirational targets for a 2% increase, or less. Its rival Delta has similar cost targets over the long term.

American is also facing new pressure from markets about closing the competitive margin gap with Delta Air Lines after United boldly declared in late 2016 that it would surpass Delta's margins by 2020. Now American is fielding questions about a timeframe for bringing its margins in line with Delta's.

To be fair, American is in the final stages of its integration, while United's merger with Continental was botched for years before its current management overhaul. Perhaps the markets should exercise some level of patience with American as it works to fully complete its merger before demanding margins on par with Delta.