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American and United Airlines Soar to New Heights in Market Recovery

In the aftermath of recent challenges faced by Boeing (BA), the stocks of major airlines are making a strong comeback.

United Airlines (UAL) and American Airlines (AAL) are leading the pack, with positive earnings reports contributing to their ascent.

airlines earning season

American Airlines Surges to Multi-Month Highs

American Airlines has made a remarkable recovery, reaching multi-month highs after surpassing Q4 EPS estimates and providing a robust FY24 EPS guidance. The airline's success is attributed to the strength of its travel rewards program and achieving its best-ever Q4 completion factor.

Analyst Helane Becker from TD Cowen recognizes American Airlines' positive momentum, stating, "We are upgrading shares of American Airlines Group to Outperform and increasing our PT to $21." The airline's operational improvements and impressive 2024 guidance have instilled confidence in its potential for free cash flow generation and progress on reducing leverage. An upcoming investor day in March is expected to serve as a near-term catalyst for further positive developments.

United Airlines Overcomes Challenges

United Airlines faced setbacks due to the FAA's grounding of the Boeing 737 Max 9, which affected its quarterly performance. Despite this, the airline managed to exceed expectations in its Q4 earnings report. The grounding of the Max 9 fleet is expected to persist until January 26th, leading to a projected quarterly loss. However, United Airlines reported adjusted earnings per share of $2.00 for Q4, surpassing the expected $1.70. Revenues of $13.63 billion also slightly exceeded estimates.

Executives at United Airlines highlighted the continued strength in travel demand towards the end of the previous year and the early weeks of 2024. The company foresees adjusted earnings of $9 to $11 per share for the full year 2024, aligning with analyst expectations. Notably, premium cabin revenues rose by 16% year-over-year, and basic economy experienced a 20% year-over-year increase.

Market analysts interpret United Airlines' success as a result of its strategic focus on transatlantic travel and investments in higher-end seating and amenities. The airline anticipates international travel demand to act as a positive force, countering the challenges posed by crowded domestic flight routes.

Despite a wider-than-expected loss projection for the current quarter, investors responded positively, driving price up. UAL stock price is up 9% this week.

In summary, both American Airlines and United Airlines are making significant strides in their market positions, showcasing resilience and recovery after recent industry challenges.

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