American Airlines Earnings: Climbing Back Into Corporate Travel’s Good Graces

Key Morningstar Metrics for American Airlines Group

• Fair Value Estimate: $14.60
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of American Airlines Group’s Earnings

Like other airlines, American Airlines Group AAL benefited from lower fuel costs in the fourth quarter, allowing it to book over $1.1 billion in operating profit in the last three months of 2024, nearly half its annual total of $2.6 billion, which fell 13.9% compared with 2023.

Why it matters: The biggest drivers of airline finances—such as fuel costs, labor costs, and passenger demand—are felt almost equally by industry carriers. But in 2024, American also had an idiosyncratic and self-inflicted factor to overcome: its ill-fated push to coax corporate travelers to its app.

• American lost market share in 2024 in the lucrative corporate and business traveler market to its US rivals Delta Air Lines DAL and United Airlines Holdings UAL because of its renegotiation of ticketing contracts with company travel agencies intended to incentivize more direct bookings through digital channels.
• Rather than play along, passengers chose United and Delta, and American has since pivoted from the strategy. Though it will take most of 2025 to undo the damage, we think it will eventually regain most of the market share it lost.

The bottom line: We reaffirm American’s no-moat rating and have updated our forecast to reflect a slightly longer runway of constrained airline capacity that supports industry profitability. We’ve raised our fair value estimate from $12.10 per share to $14.60.

• The main changes were to extend by one year our forecast of elevated load factors and revenue yield for the airline. We note that very small changes to an airline’s finances can have dramatic effects on its share price, as they multiply and compound over many millions of flight hours.
• American’s shares are overvalued, in our view, as investors project favorable industry conditions lasting indefinitely, which we do not foresee. Rather, we believe consumer demand might slacken just around the time that more jets and capacity come online, which will mar the industry’s profits.