Analyst Note| Burkett Huey, CFA |
No-moat-rated American Airlines reported a difficult quarter as the pandemic continues to ravage travel demand, though we expect that a COVID-19 vaccine rollout this summer should dramatically improve operating results. We’re increasing our fair value estimate to $14 per share. The main sources of fair value increase were an additional $3.1 billion of payroll support and guidance that future aircraft purchases would be funded by sale-leasebacks, which more than offset a slightly lower midcycle operating margin. We believe potential investors should accept the possibilities of both substantial volatility and permanent value destruction, as we feel the airline has a highly uncertain future.