American Airlines’ Outlook Falls Short as It Expects Rising Costs
Skift Take
Key Points
- American Airlines reported record revenues in Q4 but projects a Q1 loss due to rising costs and capacity reduction.
- The airline is recovering from a controversial direct ticket sales strategy that strained its relationship with travel agencies.
- American has secured a new credit card deal with Citi, expected to enhance its financial performance significantly.
Summary
American Airlines announced record revenues for the fourth quarter but anticipates a loss in the first quarter due to rising costs driven by reduced capacity, increased regional jet flying, and costly labor contracts. In contrast, Delta and United project record first quarters. The airline is also addressing challenges from a previous direct ticket sales strategy that upset travel agencies and is recovering in corporate revenues. A new credit card agreement with Citi is expected to provide substantial financial benefits.
American Airlines is still trailing its rivals Delta and United.
The carrier reported record revenues of $13.66 billion and a profit of $590 million for the fourth quarter, but it is projecting a loss for the first quarter, partially due to rising costs. The increase in these costs are driven by lower capacity, which American expects to fall by as much as 2%, more regional jet flying, and expensive labor contracts.
The carrier’s outlook contrasts from Delta’s and United’s, both of which are expecting record first quarters. Delta CEO Ed Bastian said he expects 2025 to be the company’s “best financial year in our history.”
American is also still recovering from a botched distribution strategy that involved selling tickets directly. The strategy garnered significant backlash from travel agencies, many of which filed complaints to the Department of Transportation, arguing that the practice was anticompetitive.
The strategy was also harmful for American’s corporate revenues. Carriers like Delta, United and Alaska Airlines have enjoyed an uptick in business travel during the past year, fueled by the tech and financial services industries.
However, CEO Robert Isom said on a call with analysts Thursday that the carrier was starting to see “sequential gains in corporate revenue share.”
American also inked a new credit card deal with Citi in December, which Isom said he expects to “drive substantial incremental value” to the carrier.
The airline earned $6.1 billion in remuneration from its credit card partners in 2024, a 17% increase from the year before.
Airlines Sector Stock Index Performance Year-to-Date
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Photo Credit: An American Boeing 787. Wikimedia Commons/Jakkrit Prasertwit Airbus / Airbus
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