American Airlines Group Inc. Q4 FY2025 earnings call

Key Points

• CEO Robert Isom highlighted pride in the team's work in 2025, including navigating winter storm Fern and strong labor agreements. The balance sheet is strong, and the fleet is in excellent shape.
• Focus areas for 2026 include delivering an elevated customer experience (e.g., new flagship suites, lounge expansions, Wi-Fi rollout), maximizing network and fleet power (e.g., expanding international fleet, growing hubs in Philadelphia, Miami, Phoenix), building partnerships with Citi for loyalty growth, and advancing sales/distribution and revenue management efforts.
• In 2025, Net Promoter Score for on-time customers was the highest in company history, and the new flagship suite products have delivered leading customer satisfaction scores.

Excluding net special items, American reported fourth quarter adjusted earnings per share of $0.06 and full year adjusted earnings per share of $0.36. Premium unit revenue outpaced main cabin throughout the quarter. Atlantic unit revenue was up 4% year over year, Latin America remained under pressure, and Pacific unit revenue was slightly down year over year but showed sequential improvement from the third quarter supported by strength in premium cabins. Premium unit revenue is expected to remain strong in 2026, and main cabin is expected to deliver strong year over year improvement assuming a stable macroeconomic backdrop.

2026 Guidance

• Q1: Capacity projected to be up 3%-5% year over year, revenue up 7%-10% year over year, CASM ex fuel ex profit sharing and net special items up 3%-5%, expected adjusted loss per diluted share between $0.1-$1.50. Includes impact of winter storm Fern.
• Full year: Expected adjusted earnings per diluted share of approximately $1.70-$2.70. Expect free cash flow generation of more than $2 billion. 2026 total capital expenditures expected to be between $4-$4.5 billion, with 55 new aircraft deliveries.
• Debt reduction: On track to have total debt below $35 billion by end of 2026, a year ahead of schedule.

Risks

• Weather-related operational disruptions, such as winter storm Fern, which caused significant flight cancellations and operational challenges. The impact of such events on revenue and operations is a key risk.
• Government shutdown impact on revenue, particularly in the domestic entity with significant government-related traffic.

Q: Talk about profitability by hub and upside in 2026 and beyond.

A: Robert Isom discussed Chicago, stating they are rounding out the schedule to 500 flights and expect Chicago to return to average profitability of the hub network.

Q: About cost trajectory in 2026.

A: Devon May said unit cost expected to be low single digit growth in line with mid single digit capacity, with CASM in 2% to 3% range prior to winter storm Fern.

Q: Premium growth rate and impact on revenue outlook.

A: Nat Pieper mentioned premium performance was superior in 2025, and in 2026, premium mix will improve with new aircraft deliveries and deployments of premium seats into international markets.

Q: Debt reduction and balance sheet focus.

A: Devon May said focus remains on customer care, investments, and putting free cash flow into balance sheet, aiming for double b flat credit rating and inside 3x net debt.

Q: Full year guidance conservatism and Chicago profitability.

A: Devon May said Q1 guidance is a 50-50 forecast, and Robert Isom addressed Chicago profitability, stating they are doing right by customers and team members and expect Chicago to return to pre-pandemic profitability.

Q: Capacity growth and RASM sustainability.

A: Devon May said capacity expected to be mid single digits, and Nat Pieper mentioned loyalty program growth translating to higher unit revenue.

Q: Operations impact of DFW investments and Chicago operations.

A: Robert Isom discussed DFW facilities projects and technology improvements for better operations, and on Chicago, they are rounding the schedule back out and expect a great product this summer.

Q: Full year margin rate sustainability.

A: Robert Isom said it starts with elevated customer experience, network scale, young fleet, Citi partnership, and sales/marketing efforts, anticipating margin growth.

Q: Government travel segment.

A: Robert Isom said government traffic was down in Q4 due to shutdown, and they are working to win back business, expecting long-term upside.

Q: Premium as a percent of total seats and growth.

A: Nat Pieper mentioned American is enhancing premium product with deliveries and modifications, and premium revenue is a significant part of their business.