American Airlines Shares Surge 12% After Airline Executives Make Big Bets on the Airline's Stock
Despite being the world's largest airline by passengers carried, American Airlines as a company isn't the most valuable airline. Actually, it doesn't even crack the top three in the US.
The market capitalization of Delta Air Lines Inc (DAL), Southwest Airlines Co (LUV) and United Continental Holdings Inc (UAL) all are higher than American Airlines Group (AAL), and it's not even close. Delta's market cap neared triple that of American Airlines recently as AA stock -- and the airline itself -- has under-performed the competition.
Famously, the Chairman and Chief Executive Officer Doug Parker made a bet with a stock analyst that American Airlines stock would break 60 before the analyst turned 60 in November 2018. That didn't happen. On the last trading day before the analyst's birthday, the stock price closed at just $37.95 per share.
It hasn't gotten any better since then. This Monday, American Airlines stock price closed at its lowest price since June 2016: $27.20 per share. That's despite AA receiving long-awaited tentative approval of its joint venture with Qantas -- which allows the two airlines to coordinate prices for their combined 50%+ share of the market between the US and Australia/New Zealand.
Then something drastic occurred. On Tuesday, AA's top executives — and one director made large personal bets in the company. In total, seven of them purchased a combined 110,000 shares for over $3 million. Nearly half of the total was invested by CEO Doug Parker:
| Report | Role | Shares Purchased | Average purchase price | Amount Invested |
|---|---|---|---|---|
Doug Parker | Chairman and CEO | 50,000 | 28.0857 | $1,404,285 |
John T Cahill | Director | 25,000 | 28.5989 | $714,973 |
Robert Isom | President | 15,000 | 27.7500 | $416,250 |
Stephen Johnson | VP of Corporate Affairs | 5,000 | 27.7163 | $138,582 |
Elise Eberwein | VP People and Communications | 5,000 | 27.7639 | $138,820 |
Maya Leibman | VP and Chief Information Officer | 5,000 | 27.6300 | $138,150 |
Derek Kerr | VP and Chief Financial Officer | 5,000 | 27.7639 | $138,820 |
110,000 | $3,089,878 |
We know about these investments because directors, officers and more than 10% owners of publicly-traded companies are required to report when they buy or sell the company's stock.
Knowing that these purchases would be made public, the executives got ahead of the news and sent a letter to employees clarifying that "these share purchases are not part of our compensation package. They were purchased solely because of the value we see in American today and over time."
Even without that statement, a message would have clearly been communicated. The airline executives have been saying for years that they believe American Airlines' stock is undervalued. Now, with a united front, they're putting their money where their mouth is.
While a $3 million investment sounds like a lot of money to most of us, these executives were already financially tied into American Airlines stock for many multiples of this amount.
Based on the United States Securities and Exchange Commission filings, these six executives and the one director already owned -- either directly or indirectly -- a combined 4,745,135 shares of American Airlines stock. At Monday's closing price of $27.20 per share, more than $129 million of their personal wealth was AA stock.
| Report | Role | Shares Before Purchase | Value at Monday's closing price |
|---|---|---|---|
Doug Parker | Chairman and CEO | 2,151,636 | $ 58,524,499 |
Robert Isom | President | 753,771 | $ 20,502,571 |
Stephen Johnson | VP of Corporate Affairs | 617,580 | $ 16,798,176 |
Derek Kerr | VP and Chief Financial Officer | 510,697 | $ 13,890,958 |
Elise Eberwein | VP People and Communications | 394,019 | $ 10,717,317 |
Maya Leibman | VP and Chief Information Officer | 245,286 | $ 6,671,779 |
John T Cahill | Director | 72,146 | $ 1,962,371 |
4,745,135 | $129,067,672 |
So, the investment of another $3 million is a relative drop in the bucket for these executives. Still, Wall Street certainly seems to have noticed this vote of confidence. From Monday's close ($27.20 per share) to Wednesday's close ($30.36), American Airlines' stock price has rallied more than 11.6%. Across the same two-day period, stock prices for Delta, Southwest and United have increased around 5%.
So far, the bet has paid off for the executives. The combined $3 million investment has already gained nearly $250,000 in value. Perhaps more importantly, the executives' existing investments have increased in value by nearly $15 million since Monday's close.
Stockholders are surely happy for the bounce, but the stock price has a long way to recover before Doug Parker is considered off of Wall Street's hot seat.
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- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.