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American Airlines Halts Venezuelan Operations: Here's Why

Zacks Equity Research
Issues related to Boeing 737 MAX jets hurt first-quarter 2019 earnings of the likes of American Airlines (AAL), which has multiple such planes in its fleet.

As a result of the unrest in Venezuela, American Airlines AAL temporarily suspended operations to the strife-torn nation. Following American Airlines’ action, all major U.S.-based carriers have pulled out of the South American country.

Notably, Delta Air Lines DAL and United Airlines — the wholly-owned subsidiary of United Continental Holdings UAL — had halted their respective Venezuelan operations in 2017. Apart from U.S. carriers, international carriers like LATAM Airlines LTM too have stopped operations to Venezuela due to unfavorable conditions prevailing there.  

The withdrawal of American Airlines’ operations has isolated Venezuela further. The country’s economy has already been in the doldrums for quite some time.

Markedly, American Airlines’ action was backed by advice from its pilots’ union — Allied Pilots Association (“APA”) — to suspend operations to Venezuela due to safety concerns. According to Associated Press, American Airlines operated daily flights to Caracas and Maracaibo from Miami.

In fact, APA, whose decision was supported by the carrier’s flight attendants’ union, told its pilots to turn down assignments to Venezuela. This move came after the U.S. State Department issued a warning to Americans against traveling to Venezuela due to crime, civil unrest and other factors. The U.S. administration recently suspended daily operations at the U.S. embassy in Caracas and even withdrew all its diplomats from the country.

The sanctions are aimed at isolating the Nicolas Maduro regime further. Notably, the United States and many other countries do not recognize Maduro as Venezuelan president. They recognize opposition leader Juan Guaidoas president of the South American nation instead.

In light of the political unrest engulfing the nation, we believe this Zacks Rank #3 (Hold) company’s latest decision is a well-timed one. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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