Pent-up demand for travel and solid progress on the vaccination front are helping airline companies recover from their pandemic-driven travails. However, operational inefficiencies have caused American Airlines (NASDAQ:AAL) to cancel hundreds of flights lately. And the air carrier is also struggling with elevated costs. So, with these factors in mind, and considering AAL’s poor profitability, is the stock a Buy at its current price level? Keep reading to find out.Fort Worth, Tex.-based American Airlines Group Inc. (AAL) operates primarily as a network air carrier, providing scheduled air transportation for passengers and cargo. After a dismal pandemic year, the airline industry is rebounding with increased leisure travel afforded by the success of a solid, nationwide, vaccination drive. AAL President Robert Isom told investors, "We expect a lot of passengers, tremendous pent-up demand, especially as vaccinations take hold and infection rates decline, and we're going to be ready. We have to get ready for the holidays always."
AAL reported a narrower than expected loss in the third quarter of 2021. However, high fuel and labor costs could derail efforts by most U.S. airlines to return to profit. Also, analysts expect AAL to face labor shortages and high costs. AAL is struggling with operational issues and staffing challenges, canceling hundreds of flights for a fourth straight day on November 2.
Shares of AAL have gained 75.3% in price over the past year and 25.4% year-to-date to close yesterday’s trading session at $19.83. However, the stock is trading below its 50-day and 200-day moving averages.