Company Reports

American Airlines released first-quarter results on April 25, and we have raised our fair value estimate by $0.80 per share to $13.10, predominantly due to the time value of money. Our no-moat rating is intact. A few adjustments to our fair value estimate resulting from the company's beefed-up capital spending plan for aircraft and truing up its pension obligations were offset by a more straightforward reflection of the value of its deferred tax obligations.

Before the coronavirus pandemic, much of American Airlines’ story was based on realizing cost efficiencies from its 2013 merger with US Airways and strengthening its hubs to expand margins. While we observed a bump in operating margin to 15.1% in 2015, when the merger was financially consolidated and fuel prices dropped, American saw steady unit cost growth through 2019, when it delivered a 6.7% operating margin. While we expect American can achieve some operating cost improvement in the coming years, we do not expect it to structurally improve its relative position among airlines.

Overall, our takeaways from American Airlines' investor day on March 4 were negative, though we have not altered our forecasts or $12.30 fair value estimate for the no-moat network airline.

Before the coronavirus pandemic, much of American Airlines’ story was based on realizing cost efficiencies from its 2013 merger with US Airways and strengthening its hubs to expand margins. While we observed a bump in operating margin to 15.1% in 2015, when the merger was financially consolidated and fuel prices dropped, American saw steady unit cost growth through 2019, when it delivered a 6.7% operating margin. While we expect American can achieve some operating cost improvement in the coming years, we do not expect it to structurally improve its relative position among airlines.

After reviewing 2023 results, we've raised our fair value estimate for American Airlines to $12.30 per share from $10.50. The primary driver of this increase was a stabilization of American's cost structure, augmented by overall revenue growth. Though the company grew revenue faster than costs, benefiting its bottom line and providing a buffer of sorts should industry conditions soften, we will keep an eye on American's ability to fill its planes—we noted the airline didn't fill as many seats in 2023 as we had expected, but it managed to garner more revenue per seat than we had forecast.

American Airlines' third-quarter results, released Oct. 19, showed continued cost growth even as the no-moat full-service carrier booked a revenue figure almost identical to the year-ago quarter. We incorporated the increase in persistent unit costs into our forecast, as well as slightly increasing ongoing capital expenditures, resulting in a fair value estimate reduction to $10.50 per share from $11.50.

Before the coronavirus pandemic, much of American Airlines’ story was based on realizing cost efficiencies from its 2013 merger with US Airways and strengthening its hubs to expand margins. While we observed a bump in operating margin to 15.1% in 2015, when the merger was financially consolidated and fuel prices dropped, American saw steady unit cost growth through 2019, when it delivered a 6.7% operating margin. While we expect American can achieve some operating cost improvement in the coming years, we do not expect it to structurally improve its relative position among airlines.

American Airlines reported robust second-quarter results on July 20 that slightly surpassed our expectations for passenger revenue but also outstripped our estimate of labor and maintenance costs, especially over the coming quarters. We have lowered our fair value estimate to $11.50 per share from $12.20.

Before the coronavirus pandemic, much of American Airlines’ story was based on realizing cost efficiencies from its 2013 merger with US Airways and strengthening its hubs to expand margins. While we observed a bump in operating margin to 15.1% in 2015, when the merger was financially consolidated and fuel prices dropped, American saw steady unit cost growth through 2019, when it delivered a 6.7% operating margin. While we expect American can achieve some operating cost improvement in the coming years, we do not expect it to structurally improve its relative position among airlines.

We have taken a fresh look at the North American airlines and instituted an industry-based demand model for air travel, capacity, and revenue. As a result, we have lowered our fair value estimate for no-moat American Airlines to $12.20 per share from $21.

Before the coronavirus pandemic, much of American Airlines’ story was based on realizing cost efficiencies from its 2013 merger with U.S. Airways and strengthening its hubs to expand margins. While we observed a bump in operating margin to 15.1% in 2015, when the merger was financially consolidated and fuel prices dropped, American saw steady unit cost growth through 2019, when it delivered a 6.7% operating margin. While we expect American can achieve some operating cost improvement in the coming years, we do not expect it to structurally improve its relative position among airlines.

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.

American Airlines 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.

American Airlines posted solid fourth-quarter and full-year 2022 results as underlying travel demand remains strong. The airline delivered record sales of $49 billion for the year and generated $1.6 billion in operating profit, both consistent with our full-year forecast. Its revenue for the full year exceeded 2019 levels by 7%, despite flying nearly 9% less capacity. It has also delivered three consecutive quarters of operating profitability, despite grappling with higher costs related to fuel and hiring and training flight crew personnel. The company benefited from favorable pricing dynamics to offset inflationary costs during the year. We raise our fair value estimate by 5% to $21 per share to reflect continued strength in the demand environment.

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.

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.

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 at 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.

We’ve increased our fair value estimate about 2.5% to $20 per share for no-moat-rated American Airlines following the firm’s third-quarter earnings release. American delivered its second consecutive quarter of profitability, posting total revenue of $13.5 billion (13% higher than third-quarter 2019 levels) and adjusted operating margins of 7.2%. Despite grappling with nearly 10% lower capacity and 93% higher fuel costs compared with the third quarter of 2019, robust financial results were enabled by strength in underlying travel demand and favorable pricing during the quarter.

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 at 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.

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 at 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.