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Jun 4, 2020

American Air surges up to 30% on signs that demand is reviving

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​American Airlines Group Inc. soared the most in two months after the carrier said it would boost July flights 74 per cent, signaling that U.S. travelers freed from shelter-in-place orders are returning more quickly than expected.

The busiest days next month will have about 4,000 flights, up from 2,300 in June, said Vasu Raja, American’s senior vice president of network strategy. The July figure is equivalent to 40 per cent of capacity a year earlier, compared with 30 per cent in June, the airline said Thursday.

American’s expanded schedule builds on recent indications from rivals that customers are starting to make their way back onto planes after fleeing in April because of the coronavirus pandemic. While traffic is still weak by historical standards, the airline’s trends suggest that the worst has passed. American’s load factor, or the average share of seats filled per plane, climbed to 55 per cent last week from 15 per cent in April.

“People are hungry, eager to get back into the economy,” Raja said in an interview. “We feel a real confidence to fly a much bigger July.”

American jumped 20 per cent to US$14.26 at 10:39 a.m. in New York after advancing as much as 30 per cent for the biggest intraday gain since March 24. Several other airlines were among the 10 best performers on the S&P 500 Index.

Next month, American will bring back some of the 450 jets it parked during the worst of the collapse in flying. It hasn’t determined which aircraft will be put back in service.

Optimism’s Limits

American acknowledged the limits to the improving outlook. The rebound is still weak on lucrative routes to overseas destinations, with the company planning to fly less than 20 per cent of last year’s international schedule compared with 55 per cent of domestic capacity. Also, American delayed the planned resumption of additional foreign routes by at least a month.

Even with the encouraging signs at home, the domestic recovery is “tenuous,” Raja said. And the Fort Worth, Texas-based company is still retiring more than 100 aircraft, including three separate fleet types.

But based on current trends, the nadir appears to be in the rear-view mirror.

The number of daily passengers has grown to 110,330 from 32,154 in the first three weeks of May and “is inching north all the time,” Raja said. By comparison, the airline carried about 600,000 passengers daily pre-COVID 19.

Business, Leisure

The recent gains range from business to leisure trips, Raja said. Corporations are relaxing travel restrictions in states such as Texas and Florida that have eased quarantine requirements. Vacationers are booking flights to amusement parks in Florida, beaches along the Gulf Coast and mountain destinations in Montana, Utah and Colorado.

American resumed service to six international cities Wednesday, but will delay until August or later other flights from the U.S. to Europe and Latin America. The airline’s full July schedule will be available for purchase starting June 7.

United Airlines Holdings Inc. and Delta Air Lines Inc. also are resuming some overseas flights, but lucrative international business traffic is expected to be the slowest area to rebound. Confusion over which countries have lifted travel restrictions and whether tourist attractions, hotels or other industries are open has contributed to the slower global recovery, Raja said.

American also will begin reopening its loyalty club lounges in phases starting June 22, after making improvements to encourage social distancing and reduce the possible spread of COVID-19. The measures include shields at desks and foot-operated door openers.