Breakdown Of Prospects Amid Price Fluxes of American Airlines Group Inc.

Just one week ago, American Airlines Group Inc. announced a $4.2 billion capital raise to pay for upgrades to its fleet and other services. But market estimates say, according to a Bloomberg report, that an unidentified group has amassed a leveraged bet of at least $3 billion on cheaper prices down the road. Then came news that the yet unnamed group made a bet that Starbucks would outperform McDonald’s. The logic for this is that customers would visit one store over the other instead of using the Starbucks app.

“If the maker of mobile ordering in Starbucks owns (technology) from start to finish in the market, that could end up with them being the most compelling challenger to McDonald’s in the short-term,” Redpoint’s Luke Beatty said.

Analysts at Morningstar have projected that an initial driver of future airfares could be developments regarding the IATA’s Chief Executive Officer’s proposals on multilateral agreements regarding aviation regulation. “In particular, President Trump appears willing to roll back some of the current international regulations and progress toward a more open international framework is important.”

Meanwhile, Mark Luschini, chief investment strategist at Janney Montgomery Scott, doesn’t believe that regulation is a “specific issue” or “monolithic” as what some are describing it as.

“Airlines are exposed to many issues besides air routes. And a regulatory environment like that which had existed during previous decades, where pricing was traded on pricing and not geographic or business considerations, just doesn’t make for healthy pricing,” he noted in a recent research note.

“Rather, the public sector has become detached from the markets. And as financial securities become more attractive than other types of financial securities, this detachment from the markets has become so great that it now serves as a barrier to private sector capital pouring into its ventures. In fact, the government would prefer that firms don’t even make such capital expenditure decisions and force it to depend entirely on the free market in pricing the assets.”

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