American Airlines Group delivered a robust financial performance in the fourth quarter of 2024, surpassing analyst expectations. The airline reported $13.7 billion in revenue, reflecting a 4.6% year-over-year increase, while earnings per share (EPS) stood at $0.86, significantly outperforming the forecasted $0.66. The company’s adjusted operating margin improved to 8.4%, driven by operational efficiencies and strong passenger demand. However, these gains were partially offset by rising labor costs, which increased by 11.2% during the quarter.
Despite the strong earnings report, American Airlines issued a weaker-than-expected Q1 2025 guidance, leading to a 7.56% drop in stock value. Management projected an adjusted loss per share between $0.20 and $0.40, a stark contrast to the expected $0.04 loss estimated by analysts. This cautious outlook has raised concerns among investors, particularly as the airline navigates rising costs and ongoing economic uncertainties.
Strategic Partnerships and Debt Reduction Efforts
American Airlines remains a dominant force in the aviation industry, with major hubs in Dallas/Fort Worth, Miami, and Chicago, facilitating a vast domestic and international network. The company has been actively working on strengthening its financial position, successfully reducing its debt by $15 billion ahead of schedule.
In a key strategic move, American Airlines extended its co-branded credit card agreement with Citi through a new 10-year deal set to take effect in 2026. This agreement is expected to reinforce the airline’s loyalty program and provide an additional revenue stream. However, the airline faced regulatory challenges, including the termination of its Northeast Alliance with JetBlue, which will require strategic adjustments to maintain market competitiveness.
Operational Performance and Challenges
American Airlines leveraged strong passenger demand and route optimization to achieve record revenue in Q4. Passenger unit revenue outperformed market expectations, particularly in the domestic, Atlantic, and Pacific regions. Revenue passenger miles increased 4% year-over-year to 60.68 billion, while capacity grew by 2.5% to 71.5 billion available seat miles.
Cost management played a crucial role in sustaining profitability. The airline benefited from a 20.8% reduction in fuel prices, which helped mitigate the impact of rising labor costs. Despite this, the company recorded a one-time write-down related to 43 Embraer 145 regional aircraft, reflecting an ongoing fleet optimization strategy. Strong free cash flow of $2.2 billion helped boost liquidity to $10.3 billion, further reinforcing financial resilience.
Cautious Outlook for 2025
Looking ahead, American Airlines anticipates a challenging first quarter, with an expected adjusted loss per share between $0.20 and $0.40. This forecast reflects seasonal trends and market volatility, with full-year earnings estimates ranging between $1.70 and $2.70 per share.
Investors will be closely monitoring the airline’s efforts to control costs, particularly wage-related expenses, and the impact of fluctuating fuel prices, as the company does not hedge fuel costs. American Airlines remains committed to further debt reduction and operational efficiency, but broader market uncertainties could impact performance in the coming months.
