American Airlines upgraded as business travel share has 'room to improve'

Investing.com -- Barclays analysts upgraded American Airlines (NASDAQ:AAL ) to Equal Weight from Underweight this week, citing improvements in its business travel strategy and balance sheet management.

The upgrade comes as the airline begins to recover from a challenging year marked by controversial decisions and competitive setbacks.

In a note to investors, Barclays (LON:BARC ) highlighted American's 2023 move to push corporate customers onto its own booking channels, reducing reliance on third-party global distribution systems (GDS).

This strategy, while aimed at cutting costs, backfired, leading to "significant share loss in lucrative corporate travel to other competitors."

However, analysts are optimistic about a rebound. "Looking into 2025, we see American as likely to gain back some lost share," Barclays wrote.

The recovery is expected to be driven by a rollback of earlier commercial changes and a new co-brand card agreement that could enhance revenue.

Additionally, with all labor contracts now settled, the bank says the airline is positioned to achieve cost efficiencies and improve earnings.

Barclays also noted American's potential financial upside, pointing to expected higher cash flows due to delayed Boeing (NYSE:BA ) deliveries and the ability to address upcoming debt obligations, including $1 billion in convertible notes maturing in 2025.

Despite these improvements, AAL shares now trade "nearly in line with valuations of Delta and United," after previously trading at a premium due to higher debt leverage, Barclays added.

Barclays believes the strategic realignment and financial improvement underpin the brighter outlook for the carrier as it seeks to reclaim its footing in the competitive airline market.

Source: Investing.com