AAL Gears Up for a Busy Summer Season: How to Play the Stock

American Airlines AAL expects the current summer season to be a very busy one. The carrier aims to operate in excess of 715,000 flights during the peak summer period from May 16 to Sept. 2. This time around, the airline heavyweight aims to operate nearly 5% more flights than last summer. 

AAL intends to operate nearly 38,000 flights over the Memorial Day weekend (May 22–27). The most-traveled days during the period are likely to be May 22 and May 23, each with 6,471 departures. For the entire summer season, the most travelled day for American Airlines is expected to be July 6, with nearly 6,800 flights scheduled for that day. The business can be gauged from the fact that as many as five AAL flights are expected to depart per minute this summer.

American Airlines expects that customers will check more than 50 million bags this summer. The airline has had its best-ever bag handling performance over the first four months of 2025. This summer, AAL will be flying to five new and tourist-friendly destinations, including Edinburgh, Scotland. This anticipated busy schedule is likely to attract significant traffic at AAL, in turn boosting its top line. 

Given this encouraging forecast, the question that naturally arises is how investors should approach AAL stock. Let us delve deeper.

Impressive Price Performance of AAL Stock

Over the past 30 days, shares of AAL have performed well, gaining 21.8%, above the Zacks Transportation- Airline industry’s 16.3% uptick and fellow airline player United Airlines’ UAL 19.7% gain in the same timeframe. Another airline heavyweight, Delta Air Lines DAL, has performed even better, gaining 26.9% in the past month.

1-Month Price Comparison

Signs of Easing Trade Tensions Aid AAL Stock

The airline industry, of which AAL is an integral part, has been badly hit by trade tensions. Economic uncertainties and the resultant reduction in consumer and corporate confidence, which hurt domestic air travel demand, prevented airline stocks from gaining altitude.

Against this backdrop, the signs of easing trade tensions are highly welcome. Recently, the United States and China announced a 90-day deal to temporarily reduce their high reciprocal tariffs. Last month, President Trump and Treasury Secretary Scott Bessent hinted that the 145% tariffs on Chinese goods could be reduced soon. Bessent believes that this is “unsustainable.” Trump is also exploring pauses on certain tariffs, particularly on auto imports and some consumer electronics.

Bessent expects more "clarity" on tariffs in the months ahead. During Vice President JD Vance's visit to India last month, discussions included cooperation in technology, defense, and energy, with the White House noting “progress” on several fronts.

These updates on the possibility of trade tensions easing boosted airline stocks like AAL, which has a presence in multiple countries. The developments contributed to the airline company’s recent impressive share price performance. 

Other Factors Working in AAL’s Favor

The southward movement of oil prices bodes well for AAL’s bottom-line growth. This is because fuel expenses are a significant input cost for the aviation space. Crude oil is struggling in 2025, with prices sliding to multi-month lows. Tariff concerns, weakening consumer confidence and production increase by OPEC+ have all contributed to this downward pressure. As evidence, expenses on aircraft fuel and taxes decreased 13.2% to $2.6 billion in the first quarter of 2025. Average fuel price per gallon (including related taxes) decreased to $2.48 from $2.86 a year ago. The oil price-induced cost relief could support margins and lend ticket pricing flexibility to airlines like AAL in this uncertain era.

AAL stock is quite cheap, as its Value Score of A does not suggest a stretched valuation at this moment. In terms of price-to-sales, AAL is trading at a forward sales multiple of 0.14, which is not only lower than the industry average but also other airline companies like United Airlines and Delta Air Lines. Delta Air Lines and United Airlines currently have a Value Score of A, like AAL.

AAL’s P/S F12M Vs. Industry, DAL & UAL

Headwinds That Cannot Be Ignored

Despite the above-mentioned positives, AAL stock is not bereft of near-term challenges. Agreed that tariff woes are showing signs of easing, but in the absence of long-term trade deals, the scenario continues to be uncertain. This uncertainty may hurt travel demand and spoil AAL’s rosy plans for this summer. 

AAL’s financial metrics indicate that its leverage is elevated and is a massive negative for its shareholders. The long-term debt burden of the company was $24.7 billion at the end of the first quarter of 2025, translating into a debt-to-capitalization of 94.9%, which is above the sub-industry’s 56.5%.

High labor costs (expenses on salaries and wages were up 9.2% year over year in the first quarter of 2025), mainly due to the deal with pilots inked in 2023, are hurting AAL’s bottom line.  Mishaps like those involving American Eagle Flight 5342 in January also put the stock on the back foot. American Eagle, encompassing regional carriers, is a subsidiary of AAL.

What Do Earnings Estimates Say for AAL?

Due to the abovementioned headwinds, earnings per share estimates for first-quarter 2025, second-quarter 2025, and full-year 2025 and 2026 have moved south over the past 60 days. 

Best to Avoid AAL Stock Now

There is no doubt that AAL stock is attractively valued. Low fuel costs also bode well for the company’s bottom line. Although signs of trade tensions easing have emerged, until a concrete long-term trade deal is inked, we are not out of the woods as far as this uncertainty is concerned. Declining earnings estimates also do not help matters. 

Given the current scenario, we can safely say that despite the impressive price performance by AAL recently, it is not at all advisable to buy the stock now. Until there is more clarity, investors should avoid American Airlines stock and wait for a more stable setup.

AAL currently carries a Zacks Rank #5 (Strong Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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