Where To Next For American Airlines?
The end of last week proved to be an incredibly interesting time for American Airlines (AAL). While the stock fell more than 5% on Thursday, Friday proved to bring gains. So, what’s the big deal? Well, it all has to do with an announcement that the company made that will lead to higher operating expenses; which in turn, leads to investor concerns. Today, we’ll talk about the announcement, why it’s such a big deal for American Airlines, and what binary options traders should be watching for ahead.
American Airlines Announces Wage Increases
As mentioned above, American Airlines had an interesting end of the week last week, and for good reason. On Thursday, the company reported earnings ahead of expectations and announced positive guidance. However, there was an announcement made during the trading session that really concerned investors. That announcement was increasing wages for both pilots and flight attendants.
The raises come as a result of competition. You see, recently labor contracts were signed at Delta Air Lines and United Continental. Under these contracts, pilots and flight attendants would be earning more money, making American Airlines less competitive when it comes to an employment standpoint.
As a result, American Airlines announced that when its current contract with pilots and flight attendants ends at the end of 2019, it would be handing out some big raises, primarily for pilots. While this new raise wont hit until the year 2020, the raises are coming, which means that operational expenses are going to rise for American Airlines.
Why This Is Such A Big Deal
At the end of the day, this proved to be a big hit to American Airlines’ stock price, but why? Well, the answer is relatively simple. You see, American Airlines is somewhat of a discount airline. Sure, they’re not the cheapest in the market, but they do a great job of remaining competitive, especially in comparison to other airlines of the same caliper.
This means that American Airlines already operates on razor thin margins. In fact, investors have been concerned about inflation and operational expenses for some time now as a result of the fact that the company’s books leave much to be desired.
With all of that said, it’s easy to see how increased costs associated with operating the business are leading to concerns among investors. At the end of the day, American Airlines simply isn’t in a position where it can afford to shell out masses of cash at any given time. So, the company must be strategic in its spending, and when investors see a massive, company wide raise for pilots and flight attendants, what they are really seeing is a company that may shift toward the red.
What Binary Options Traders Should Be Watching For Ahead
Moving forward, there’s no doubt that American Airlines is likely to present several profitable opportunities for binary options traders. However, if you want to take advantage of these opportunities, you’re going to need to stay on top of the news. In particular, keep a close eye on finances at American Airlines. While there are concerns over these raises at the moment, the company had a stellar quarter and is guiding for a strong year. If they can keep up with the high expectations they have set for themselves, the raises may not be much of a concern and the stock could fly. However, if for any reason, the company misses the mark, declines are likely coming.
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