American Airlines Earnings: Coming Back Strong, With Cost Growth Offsetting Elevated Yields

American Airlines Stock at a Glance

• Fair Value Estimate: $21.00
• Star Rating: 4 stars
• Morningstar Uncertainty Rating: Very High
• Morningstar Economic Moat Rating: None

American Airlines Earnings Update

American Airlines AAL reported strong first-quarter results as demand for travel remains resurgent. The first quarter put the airline on track to deliver a record year, in terms of revenue and profit, and demand for travel amid constrained capacity buoyed the airline’s revenue yield over USD 0.21 per revenue seat mile. We have updated our forecast to reflect higher yields (read ticket prices) in 2023 than we originally forecast, but also American’s evolving cost structure, with no net impact to our $21 per share fair value estimate.

A shortage of pilots and new planes will likely constrain American from achieving all the growth in its capacity that it would have wanted to this year, and we still see the airline lapping full-year 2019 capacity in 2024, though its fourth quarter of 2023 will likely surpass 2019′s.

American, along with other airlines, is wrapping up new labor contracts with the many groups of employees represented in collective bargaining, and we have revised our forecast of salaries and benefits upward accordingly. These are somewhat offset by declining fuel prices compared with 2022.