American Airlines Group Inc (NASDAQ:AAL) could be facing turbulent weather ahead if the earnings results of rival Delta Air Lines Inc (NYSE:DAL) have anything to say about it. Yesterday, Delta released its results for the fourth quarter and while the company beat expectations on both the top and bottom lines, DAL suffered a sizable drop. Subsequently, the downdraft also weighed on AAL stock, which dipped more than 2%.
One of the main culprits appears to be a so-called K-shaped recovery in both the airline sector and the broader economy. Essentially, much of the growth is concentrated on the upper arm of society — the folks who are willing and able to pay for premium services. However, because of the disruption of artificial intelligence, this arm may be longer but thinner due to fewer participants.
Major tech icons like Bill Gates have broadcasted what is already well-known: AI is displacing human labor because there’s simply less need for it. And the displacement is not happening against plumbers and electricians, who are not necessarily the airlines’ biggest consumer focus. No, they’re impacting the white-collar professionals in finance, marketing, software, quality assurance…the list goes on.
Delta may be maximizing the premium market for the airliners and even then, it wasn’t enough to lift its equity value. That doesn’t leave much margin for error for American, which is why the skeptical view of AAL stock — at least in the near term — may be more prudent. The carrier simply doesn’t have the same ability to compete in the premium realm as Delta.
Don’t read this wrong: this isn’t about shorting American or otherwise disliking the company. We just have to be realistic about what to …