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American Airlines takes a conservative view on a return to positive PRASM growth

During 2015 American Airlines was one of the first companies to predict that a return to positive passenger unit revenue would not occur until 2H2016. One of its major competitors, Delta, was more bullish, and at one point estimated that it could return to a flat trajectory by YE2015. Delta subsequently had to temper its expectations and now expects that it should gain PRASM traction by summer 2016.

After missing previous targets, Delta has added qualifiers to its latest estimates for a a return to flat or positive PRASM, explaining that if fuel prices fall a further 15% to 20%, as some forecasts suggest, passenger unit revenues could continue to face pressure.

American has not offered any specific guidance on PRASM other than to conclude that the conditions that pressured that metric during 2015 continue to linger, and similarly to Delta, the company believes that downward pressure could continue if fuel prices continue to fall. All of the focus on PRASM is against the backdrop of record industry profitability that, for now, has been largely ignored by Wall Street.

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