How American Airlines Makes Money

American Airlines Group Inc. provides air transport services for passengers and cargo such as freight and mail. Its wholly owned subsidiary American Airlines Inc. is a global network air carrier. The company offers daily flights to more than 350 destinations in over 60 countries around the world.

The source of its greatest amount of revenue is the Passenger business segment.

The company also provides regional service in the United States through American Eagle, whose operations include Envoy Air, PSA Airlines, and Piedmont Airlines, as well as contracted third-party carriers Republic Airways, SkyWest Airlines, and Air Wisconsin Airlines.

American’s stated purpose is “to care for people on life’s journey” and its focus is on “social good, global health and well-being, and our military heroes.”

Key Takeaways

  • American Airlines Group is a holding company that provides global and regional air transport services for passengers and cargo.
  • The company reports revenues in three business segments: Passenger, Cargo, and Other.
  • Passenger services account for almost 100% of the company’s revenues.
  • Competitors include Delta Air Lines and United Airlines.
  • In 2023, the company announced a 10-year, long-term use and lease agreement with Dallas Fort Worth airport for the construction and improvement of a number of terminals.

American Airlines’ Industry

American Airlines Group (AAL) operates in the Air Services industry within the Industrial Goods sector.

According to the company’s annual report for 2023, its primary business activity is its operation as a network air carrier. It offers scheduled flights for passengers and cargo through its hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. and partner gateways in London, Doha, Madrid, Seattle/Tacoma, Sydney, and Tokyo.

Domestic Competition

It faces competition for domestic service on price and for market share from well-known carriers such as:

  • Alaska Airlines (ALK)
  • Allegiant Air (ALGT)
  • Delta Air Lines (DAL)
  • Frontier Airlines (ULCC)
  • Hawaiian Airlines (HA)
  • JetBlue (JBLU)
  • Southwest Airlines (LUV)
  • Spirit Airlines (SAVE)
  • United Airlines (UAL)

For its cargo business, it faces competition from all-cargo airlines, charter airlines, and ground and rail transportation.

International Competition

American also faces intense competition for its international service to Canada, Mexico, the Caribbean, Central and South America, Europe, Qatar, China, Japan, Korea, India, Australia, and New Zealand.

Success in the international market has required American to engage in marketing relationships, alliances, cooperation agreements and joint business agreements with foreign carriers to work with each other’s flights and route networks.

American Airlines is the twelfth largest airline in the world as measured by market cap.

American Airlines’ Financials

As of May 2024, American Airlines’ market capitalization was $9.8 billion.

American Airlines’ 2023 annual report provided the company’s financial results for the 2023 fiscal year (FY). Additionally, on April 25, 2024, the company announced financial results for the first quarter of 2024, ended March 31, 2024.

Operating Revenue

For FY 2023, total operating revenue was $52.78 billion, an increase of about 7.8% over the previous year’s $48.97 billion. For the first quarter of FY 2024, revenue was a record $12.6 billion, an increase of 3.1% over the previous year’s first quarter.

Net Income

For FY 2023, net income was $822 million, a increase from the previous year’s $127 million. For the first quarter of FY 2024, net income was ($312) million, a loss from the previous year’s first quarter of $10 million.

Revenue From Business Segments

American Airlines operates as a single business segment, maintaining a fleet of hundreds of aircraft that transport both passengers and cargo globally. However, it breaks down revenue figures by Passenger, Cargo, and Other segments.

Passenger

American Airlines counts as passenger revenue any revenue that comes from transportation on its main airline or subsidiary airlines, including baggage fees, in-flight services, and mileage credit redemptions from the company’s AAdvantage member loyalty service.

For FY 2023, the Passenger segment generated operating revenue of $48.51 billion, up 8.8% over the previous year end. That amount was about 92% of total revenue. For the first quarter of FY 2024, operating revenue was $11.45 billion, an increase of 3.2% over the same period the previous year.

Passenger revenue represents the largest portion of American Airlines’ total operating revenue.

Cargo

Cargo revenue includes revenue generated from cargo transport of any kind by American Airlines. The company adapted to the 2019 pandemic by launching its first cargo-only flights since 1984.

For FY 2023, the Cargo segment generated $812 million in operating revenue, down 34.1% from the previous year. For the first quarter of FY 2024, operating revenue was $187 million, a loss of 16% over the same period the previous year.

Other

Other revenue is comprised of the sale of mileage credits to credit card companies, airline partners, and various other business partners. Other revenue also includes that generated from airport clubs, advertising, and vacation-related services.

For FY 2023, the Other segment generated $3.46 billion in operating revenue, up 9.3% from the previous year. For the first quarter of FY 2024, operating revenue was $925 million, an increase of 7.2% over the same period the previous year.

History and Leadership

American Airlines was founded in the 1920s as American Airways. In 1935, it was acquired by E. L. Cord and renamed American Airlines. Texan C. R. Smith was the company’s first CEO.

Today, American Airlines is headquartered in Fort Worth, Texas. Robert Isom is the company’s current CEO, having taken over when Doug Parker stepped down from that position in 2022.

Isom moved to the role of CEO from his position as President of the company, which he’d held since 2016. Prior to joining American Airlines, he was an executive at US Airways.

In 2016 as well, the company’s stock was included in the S&P 500 index. It has 130,000 employees working throughout the world.

Recent Developments

• In March 2024, American Airlines placed orders for 260 new planes, including 85 Airbus A321neo, 85 Boeing 737 MAX 10, and 90 Embraer E175 aircraft. The company also arranged for options and purchase rights for 193 more aircraft.

• In response to its sustainability concerns and efforts, American Airlines was named the 2023 Air Transport World EcoAirline of the Year. In addition, in 2023 it became part of the Dow Jones Sustainability World Index for the first time. The company also continues to be part of the Dow Jones Sustainability North America Index.

• In May 2023, American Airlines announced it had signed a 10-year long-term use and lease agreement with Dallas Fort Worth airport, which includes $4.8 billion in pre-approved capital investments. These investments will cover the construction of a new terminal (Terminal F), the renovation of Terminal C, and the construction of gate expansions at Terminal A and C.

• Also in May 2023, American Airlines announced that Steve Johnson would be Vice Chair and Chief Strategy Officer. In this role, Johnson will lead and shape American’s strategic efforts and initiatives. With the retirement of Derek Kerr, American’s CFO, Johnson will take over responsibility for American’s cargo and American Eagle’s regional operations.

What’s the Value of a Share of American Airlines Stock?

On May 16, 2024, a share of American Airlines was trading at $14.73.

What’s the Primary Driver of Revenue at American?

Operating revenue from passenger services provides the vast majority of American Airlines total revenue.

Was Charles Lindbergh Associated with American Airlines?

Famous for being the first person to fly alone across the Atlantic Ocean in 1926, Charles Lindbergh carried the first mail cargo for American Airways, which was later renamed American Airlines.

The Bottom Line

Founded in the first half of the twentieth century, American Airlines operates as a network air carrier, providing air transportation services for both passengers and cargo. It makes most of its money from its passenger services. The company’s current CEO is Robert Isom.