American Airlines’ third quarter saw a positive market reaction as the company met revenue expectations and delivered a non-GAAP loss narrower than Wall Street anticipated. Management credited the quarter’s performance to growth in corporate travel, a recovering main cabin business, and continued strength in premium cabin demand. CEO Robert Isom noted that improved sales and revenue management initiatives, alongside the successful execution of a new agreement with Citi, were critical to stabilizing the commercial organization. The company also began to see the benefits of targeted capacity restoration in key hub markets such as Chicago and New York.
Is now the time to buy AAL? Find out in our full research report (it’s free for active Edge members).
American Airlines (AAL) Q3 CY2025 Highlights:
- Revenue: $13.69 billion vs analyst estimates of $13.63 billion (flat year on year, in line)
- Adjusted EPS: -$0.17 vs analyst estimates of -$0.28 (38.2% beat)
- Adjusted EBITDA: $632 million vs analyst estimates of $943.6 million (4.6% margin, 33% miss)
- Management raised its full-year Adjusted EPS guidance to $0.80 at the midpoint, a 60% increase
- Operating Margin: 1.1%, in line with the same quarter last year
- Revenue Passenger Miles: 66.58 billion, up 1.08 billion year on year
- Market Capitalization: $8.56 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From American Airlines’s Q3 Earnings Call
- Scott Group (Wolfe Research) asked about sequential improvements in unit revenue and premium versus main cabin trends. Stephen Johnson, Vice Chair and Chief Strategy Officer, explained that main cabin revenues are rebounding and premium demand remains robust despite economic uncertainty.
- Sheila Kahyaoglu (Jefferies) explored the mix of premium versus main cabin capacity growth. CEO Robert Isom detailed that premium seating would grow at roughly twice the rate of non-premium, supported by new aircraft and retrofits.
- David Vernon (Bernstein) questioned the projected unit revenue uplift from premium product mix changes. Johnson noted premium leisure demand has risen post-pandemic, with premium cabins now reaching an 80% paid load factor, up from mid-60s pre-pandemic.
- Daniel McKenzie (Seaport Global) asked about Chicago’s competitive dynamics and margin potential. Isom stated American sees long-term growth in Chicago, citing rising AAdvantage enrollments and future capacity restoration as keys to margin improvement.
- Catherine O'Brien (Goldman Sachs) inquired about the sustainability of cost efficiencies and future leverage goals. CFO Devon May confirmed that labor costs are largely fixed through 2027 and reaffirmed net debt reduction targets, aiming for net debt below $35 billion by 2027.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be closely monitoring (1) the ramp-up of the new Citi co-brand credit card partnership and its impact on loyalty-driven revenue, (2) the pace and financial benefit of premium seat and flagship suite expansions across the fleet, and (3) progress in restoring share and profitability at core hubs, particularly Chicago and New York. Execution on operational efficiency measures and further adoption of digital customer enhancements will also be important indicators of strategic success.
American Airlines currently trades at $12.97, up from $12.07 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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