American Is Coming Back Strong, but Its Growth and Profitability Are Constrained

American Airlines is the largest U.S.-based carrier by capacity. Before the coronavirus pandemic, much of the company’s story was based on realizing cost efficiencies from its transformational 2013 merger with U.S. Airways and strengthening its hubs to expand margins. While we think American Airlines has done a good job of limiting unit cost increases, we note that the firm lagged peers in unit costs over the previous aviation cycle. Management sees the pandemic crisis as an opportunity to structurally improve the firm's cost position relative to peers. We think American will become more efficient from the crisis, but we are not as confident that it will improve its relative position among airlines.