American Airlines Earnings: Playing to Regain Lost Market Share Could Get Ugly

Key Morningstar Metrics for American Airlines Group

• Fair Value Estimate
  : $10.30
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of American Airlines Group’s Earnings

American Airlines Group AAL earned $446 million in operating income on second-quarter sales of $16.7 billion, a 2.7% margin. Management is investing in more premium seating to compete with Delta and United, and it announced it intends to regain historical market share among local travelers at some of its US hubs.

Why it matters: American is locked in a struggle to catch up with Delta and United to woo loyal customers 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 pursue market share at the cost of profitability.

• Amid stiff competition from United and Delta, American faced slower top-line growth than it anticipated in 2025, while its unit costs inexorably rose because of increased labor costs.
• While its fleet is newer than that of other legacy carriers, the seating on these planes was 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 perks like in-flight entertainment.

The bottom line: We have increased our fair value estimate for no-moat American to $10.30 from $10.00 per share, reflecting the time value of money. The shares trade 30% above our revised fair value estimate.