American Airlines Earnings: Going All In to Stay Competitive

Key Morningstar Metrics for American Airlines Group

• Fair Value Estimate
  : $10.00
• 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 reported a $41 million operating loss on $14 billion of revenue in the first quarter. Management is investing in more premium seating to compete with Delta and United, and they announced that the firm intends to increase capacity more aggressively than competitors in the coming months.

Why it matters: American is locked in a struggle to catch up with Delta and United in wooing loyal customers willing to pay for perks like lounges, preferred seating, and fancy meals. We think American can compete, but it may also fall prey to the temptation to pursue market share too aggressively.

• Amid stiff competition from United and Delta, American faced slower top-line growth than 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, 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 decreased our fair value estimate for no-moat American’s shares to $10.00 per share from $13.50, reflecting narrower margins in the wake of higher fuel costs and American’s lower ability to pocket premium yields as it expands its network and takes market share.