American Airlines Posts Record Revenue, Profit Squeezed by Fuel
American Airlines Group swung back to a $71 million profit on record second-quarter revenue of $16.7 billion, even as fuel costs erased half of the airline's fare gains.
American Airlines Group (AAL) reported record second-quarter revenue of $16.7 billion, up 16.3% from a year earlier, and returned to profitability with net income of $71 million, or $0.11 a diluted share, after posting a $382 million loss in the first quarter.
The rebound in revenue outpaced the airline's own prior guidance, which had called for second-quarter growth of 13.5% to 16.5%. It also marked an acceleration from the 10.8% revenue growth the airline recorded in the first quarter, when revenue reached its own quarterly record of $13.9 billion. But the swing to profit masked a steep year-over-year decline: net income fell 88.2% from $599 million in the second quarter of 2024, and operating margin compressed to 2.7% from 7.9%, the second consecutive quarter of year-over-year margin erosion.
The gap between top-line strength and bottom-line pressure traced to fuel. Fuel expense rose 83.3% year-over-year to $4.88 billion in the quarter, far outpacing the 48.7% increase the airline had logged over the trailing six months, and higher fares covered only about half of the resulting $2.2 billion cost increase. Non-fuel unit costs added to the strain, with CASM-ex up roughly 3% year-over-year to 13.93 cents per available seat mile.
Premium travel and corporate demand carried the revenue side. Premium passenger unit revenue climbed 13.4% year-over-year, outpacing Main Cabin's 8.8% gain, while domestic passenger unit revenue growth accelerated to 10.6% from the 7.6% total unit revenue growth reported in the first quarter. Managed corporate revenue grew 26% year-over-year, the fifth straight quarter of double-digit corporate growth. Internationally, the Pacific region led with 15.1% passenger unit revenue growth, a shift from the first quarter when the Atlantic region led at 16.7%.
Capacity growth ran ahead of demand on a load-factor basis: available seat miles rose 5.4% year-over-year while passenger load factor slipped 1.5 points to 83.2%, even as revenue set a record. American also disclosed that a rebanking of its Dallas-Fort Worth hub cut system misconnections by nearly 25% year-over-year and pushed DFW unit revenue 4 points above the system average, a result the first-quarter release had described only as in progress. Loyalty engagement strengthened as well, with AAdvantage enrollments up more than 30% year-over-year and co-branded Citi card spending up 8%, building on a new Citi agreement referenced earlier in the year.
For the third quarter, American guided to revenue growth of 16.0% to 19.0% year-over-year, alongside another jump in fuel expense of $1.7 billion on an assumed price near $3.75 a gallon, and CASM-ex growth of 2.5% to 4.5%. Full-year adjusted earnings guidance was widened to a range of a $0.65 loss to $0.65 in profit per share, a reset from the first quarter's outlook for results approximately flat with 2024, as fuel costs weighed on the forecast.
American ended the quarter with $11.3 billion in total available liquidity and continued paying down debt after reporting total debt of $34.7 billion in the first quarter, its lowest level since mid-2015. Separately, the airline disclosed the election of John W. Dietrich to its board effective July 15 and the planned year-end retirement of Vice Chair and Chief Strategy Officer Steve Johnson.