In 2017, Donald Trump was in the first year of his presidency, "Star Wars: Episode VIII - The Last Jedi" was the top movie of the year, and people didn't know Covid from a hole in the ground.
And that also the last year that American Airlines (AAL) hosted an Investor Day.
Seven years ago, Doug Parker was the chairman and CEO of the world's largest airline, and he told investors in a statement that "2017 was a remarkable year for American Airlines."
"Our operation continues to deliver record-setting performance for the company, and the credit goes to our team members," he said. "We’re entering 2018 with strong momentum."
The closing price for American Airlines on Dec. 29, 2017 was $50.71, up 11% for the year. American was trading at $14.59 at last check.
An airline industry veteran, Parker stepped down from his position in 2022, after helping win $54 billion in federal aid to cover payroll expenses in response to the Covid-19 pandemic that ravaged the airline industry.
“It likely would have happened sooner, but the global pandemic — and the devastating impact it had on our industry — delayed those plans,” Parker said in a note to staff, according to CNBC.
Parker was replaced as CEO by Robert Isom, who was the air carrier's president at the time, and who hosted American's latest investor day event on March 4.
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New plane orders
"I'm incredibly proud of the work we have done over the past two years to build an American that is stronger, more focused and well-positioned to realize our full potential," he said in a statement.
Isom added that the Fort Worth, Tex.-based company "is positioned to deliver a reliable operation for customers while generating durable earnings over the long term."
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According to news accounts of the event, American said 80% of its revenue this year will come from loyalty program members and passengers who buy more expensive tickets, up from a 70% share in 2017.
The airline is renegotiating its credit card agreements with its partners, Citi and Barclays.
Vasu Raja, American’s chief commercial officer, said that a renegotiation of the contracts would increase revenue for American,
“If you were to ask any of our card partners, they have very few cards, if any, in their portfolio that are exhibiting the kind growth in spend per active account and total acquisition growth as well as what ours has done,” Raja said, according to CNBC.
American also announced that it had ordered 260 new narrow-body planes, including 85 Airbus A321neo, 85 Boeing 737 MAX 10 planes and 90 Embraer E175 aircraft.
The orders also include options and purchase rights for an additional 193 aircraft.
Separately, as the airline was hosting its investors day, the Association of Professional Flight Attendants, the union representing American's flight attendants, said its members would picket outside the entrance to the New York Stock Exchange "to educate investors that AA is still waging labor war against its largest unionized workgroup."
The union said that “American Airlines Flight Attendants continue to languish under pay rates negotiated in 2014…while American’s upper-level management has rewarded themselves handsomely with incentives and bonuses.”
Analyst cites concerns
The union had asked the National Meditation Board to allow the flight attendants to go on strike in November, but the board denied their request, forcing them to continue negotiations with the airline.
The union filed its second request for release in January. American said at the time that it “continues to negotiate with APFA in good faith."
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A status conference, requested by the union, is scheduled for March 13.
Meanwhile, analysts had varied reactions to American's first investor day.
Morgan Stanley kept an overweight rating and a $20 price target on American Airlines shares following the event.
While the event “perhaps lacked a headline grabbing announcement or metric,” the firm said, management painted a picture of compounding earnings growth by focusing on the basics.
Consensus out-year numbers “need to come up meaningfully and the stock has only just begun to reward this," Morgan Stanley said.
Bernstein raised the firm's price target on American Airlines to $21 from $20 and kept an outperform rating on the shares.
Analysts at the firm said that American's investor day targets came in ahead of Wall Street's expectations, but the share response was muted by concerns about near term, an aircraft order, and perceived lack of specificity on how targets will be achieved.
The firm, however, does not equate the lack of an earnings bridge to lack of a strategy, Bernstein said, and sees upside to estimates driven by steady execution and its card program renewal.
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