American Airlines Group Inc. (AAL) Earnings & Analysis

Latest quarter

American Airlines reported third-quarter revenue of $16.3 billion, above the $16.2 billion consensus. Its adjusted loss per share of −$0.28 matched the consensus. Revenue rose 19.3% from $13.7 billion a year earlier, while diluted earnings per share fell to −$0.41 from −$0.17.

The company’s filing attributed passenger revenue growth to higher yield, or revenue per passenger mile. Passenger revenue rose 19.5% to $14.9 billion, while cargo revenue increased 29.1%, helped by higher cargo traffic and yield. Other operating revenue rose 15.2%, primarily because of higher loyalty-program revenue.

Fuel and related taxes cost $4.6 billion, up $1.9 billion, or 67.5%, as the average fuel price and consumption increased, the filing said. American attributed the increased pretax loss principally to fuel, labor and other operating costs, partly offset by passenger revenue growth.

American’s gross margin fell to 19.2% from 20.8%, and its operating margin declined to 0.70% from 1.10%. Free cash flow was −$1.2 billion, compared with −$872.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Robert Isom said higher fuel prices more than offset the third quarter’s revenue growth. He attributed the company’s revenue performance to investments in its network, customer experience, premium offerings and loyalty program, but said American was not satisfied with its financial results.

Chief Commercial Officer Nat Pieper said American had prioritized yield over filling seats during the quarter and would continue that approach in the fourth quarter. He linked the pricing strategy to premium investments and offerings at different price points. Pieper also said managed corporate revenue rose 28% in the quarter and attributed corporate sales performance to the network, customer experience, premium products and loyalty program.

Isom said American had re-established its presence in Chicago, expanded in Miami and Phoenix, and invested in Charlotte. He said the airline had also reorganized flight schedules in Dallas/Fort Worth and Philadelphia. On customer experience, he said American was adding premium seats and working to install Starlink across its mainline fleet.

Asked about capacity, Isom said American would take fuel prices into account and first look at reducing aircraft utilization, which could also help accommodate cabin reconfigurations and Wi-Fi installations. He said the company would match capacity with demand. CFO Devon May added that slower growth would put upward pressure on unit costs, while the company would continue to pursue efficiencies.

On an analyst’s question about aircraft investment, May said American was working on a widebody order campaign that could replace its 777-200 fleet in the next decade and provide additional growth. He said capital spending might rise slightly next year, with investments supporting revenue initiatives.

Asked about fees, Isom said American does not discuss pricing or fees specifically. He said the company was focused on providing value across its products, including basic economy.

Guidance

CFO Devon May said American now expects full-year 2026 fuel expense to be more than $7 billion higher than in 2025 and an adjusted loss per diluted share of between $1 and $1.60. He also said American now expects to end the year with net debt of approximately $30.5 billion, flat with the end of 2025.

CEO Robert Isom said American now expects its growth rate in 2027 to decelerate considerably, given elevated fuel prices.