The AAL network carrier offers transportation of passengers and cargo through air. At the beginning of 2018, the stock of the company was at $60 per share. The price kept on receding by the mid and end of 2019 before the outbreak of the virus.
A Short History
At the beginning of 2020, when the virus started its onslaught, the stock of American Airlines sold in a vast amount. Many of the stocks related to travels sold the same way. The travel and airline industry was primary affected due to the shutdown and travel bags all around the world. Before the pandemic hit around the beginning of February 2020, the AAL stock price was $30 per share.
It says that the stocks sold at $30 had decreased in price by 50% compared to the price in 2018. In March 2020, it came down to $14 per share, which is 50% down compared to their high a month before. Then for the months that followed it, kept on decreasing until it when below the $10 mark. As of now, the mid-November 2020, the price has advanced to $12.7 per share that shows an improvement of 4.4 %.
What Led to The Crisis?
Statistics prove that the AAL stock price was coming down even before the break of the pandemic. The performance marked in the quarterly earnings report shows that the airline fell behind the revenue and earnings expectations. The reason for this shortfall in revenue was because of crashes of the Boeing 737 max aircraft. As a result of the two crashes, the federal aviation administration ended up grounding the aircraft. So, many of the companies who had brought the Boeing aircraft took a hit as they couldn’t make money out of them.
Any such bans or mandatory measures can lead to a dip in stock prices. It takes a huge investment to buy an aircraft. Companies like AAL recuperate investment money over the lifetime of the aircraft. Huge loans are borrowed from banks expecting heavy returns over the lifetime of the equipment or in, this case, airplanes.
The airlines that brought the shelved aircraft were paying for them with no returns. The situation resulted in a cash burn for the companies. The American airline had already brought 24 Boeing max aircraft with 76 in order. Even though they reached a settlement with Boeing, the crisis could not be prevented.
To add to this crisis, the ongoing pandemic leading to the travel ban made the company slash down a lot of flights landing them in a tight spot. If you want to buy this stock, you can check its cash flow at https://www.webull.com/cash-flow/nasdaq-aal.
Disclaimer: The analysis information is for reference only and does not constitute an investment recommendation.