American Airlines Earnings: Outfitting Premium Cabins to Stay Competitive

Key Morningstar Metrics for American Airlines

• Fair Value Estimate: $15.20
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of American Airlines’ Earnings

American Airlines AAL reported a $451 million operating profit on $14 billion of revenue in the fourth quarter. The US government shutdown cost the firm approximately $359 million in the quarter. Management plans to reconfigure its fleet with more premium seating to compete with Delta and United.

Why it matters: American is now locked in a struggle to catch up with Delta and United to woo loyal customers who are willing to pay or spend mileage points for perks like lounges, preferred seating, and fancy meals. We think American has the tools to compete, but it may also fall prey to the temptation to overly aggressively pursue market share.

• Amid stiff competition, American faced slower top-line growth than it anticipated in 2025, while its unit costs inexorably rose because of increased labor costs. As other legacy carriers experienced in 2025, American’s premium revenue growth outpaced economy sales by seven percentage points.
• While its fleet is newer than other legacy carriers, these were configured before the pandemic and the craze for premium travel took hold. The airline must now reconfigure some of its jets to accommodate more premium seats and in-flight entertainment.

The bottom line: We have increased our fair value estimate for no-moat American’s shares to $15.20 per share from $12.80, reflecting high revenue yields in the industry, which we believe may persist in the medium term as unprofitable competing flight capacity exits the US domestic network.

• The shares now trade about 10% below our revised fair value estimate, and given our Very High Uncertainty Rating, we would not consider them attractively valued above $7.60 per share.