The U.S. Department of Transportation (DOT) has fined American Airlines (NASDAQ:AAL) $4.1 million for unlawfully keeping passengers stranded on dozens of flights during long delays without allowing them to exit the plane. This marks the largest-ever fine imposed by the DOT for long tarmac delays.
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American Airlines Fined for Tarmac Delays
An extensive investigation by the DOT’s Office of Aviation Consumer Protection (OACP) revealed that passengers on 43 American Airlines flights between 2018 and 2021 were forced to sit on the tarmac for over three hours without being given a chance to deplane, violating the federal rule for tarmac delays. These tarmac delays impacted a total of 5,821 passengers. Most of the delays were at the Dallas Fort Worth Airport.
Of the $4.1 million fine, half will be credited to AAL for compensation that it has already paid to customers for such delays. It is worth noting that in 2016, DOT imposed a then-record fine of $1.6 million on American Airlines for tarmac delays.
U.S. Transportation Secretary Pete Buttigieg said that the latest action against American Airlines is part of the department’s continued efforts to enforce the rights of airline passengers. In May, the DOT proposed a rule that would require airlines to provide compensation and cover expenses for amenities such as meals, hotels, and rebooking when they are responsible for stranding passengers.
Meanwhile, American Airlines told DOT that these delays were caused by exceptional weather issues and the 43 flights included in the enforcement order represented less than 0.001% of the nearly 7.7 million flights operated by the carrier and its regional partners during 2018 to 2021. AAL added that it has devoted significant time and investment to address the issues related to tarmac delays.
Is American Airlines Stock a Buy, Sell, or Hold?
On Monday, Evercore analyst Duane Pfennigwerth lowered his price target for American Airlines to $17 from $19 and maintained a Hold rating on the stock. The analyst adjusted his airline estimates to reflect a higher assumed fuel curve and the Hawaii wildfire’s impact. Pfennigwerth said that he would be surprised to see revenue outlook upgrades at the upcoming early September conferences.
Wall Street is sidelined on American Airlines stock, with a Hold consensus rating based on one Buy, nine Holds, and two Sells. The average price target of $17.55 implies 19.1% upside. Shares have risen about 16% year-to-date.
