How American Airlines Makes Money

American Airlines Group Inc. (AAL) provides air transport services for passengers and cargo. Its wholly owned subsidiary American Airlines Inc. is a global network air carrier. The company also provides regional service through American Eagle, whose operations include Envoy Aviation Group Inc., PSA Airlines Inc., and Piedmont Airlines Inc., as well as third-party carriers.

Some of American Airlines Group's competitors include major carriers such as Delta Air Lines Inc. (DAL) and United Airlines Inc. (UAL), as well as global and regional carriers throughout the U.S. and abroad.

American Airlines' Financials

In January, American Airlines announced financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company posted a net loss of $931 million, an improvement from the net loss of $2.2 billion in the year-ago quarter. Revenue for the quarter rose 134.1% year-over-year (YOY) to $9.4 billion.

The airline carrier's business has been severely adversely impacted by the collapse in travel demand triggered by the COVID-19 pandemic and related travel restrictions. Vaccine rollouts and the relaxation of restrictions have helped travel demand to begin to rise again. Even as American Airlines' revenue recovers, however, it is still at about 83% of the level it was in 2019, before the pandemic.

American Airlines' Business Segments

American Airlines operates as a single business segment, maintaining a fleet of hundreds of aircraft that transport both passengers and cargo globally. Even though American Airlines has just one reportable segment, it breaks down revenue figures by passenger, cargo, and other revenue. We describe these revenue streams in detail below. American Airlines provides only a single net income/loss figure for the entire company.

Passenger revenue

American Airlines counts as passenger revenue any revenue that comes from passenger services 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.

Passenger revenue represents the largest portion of American Airlines' total operating revenue. For Q4 FY 2021, passenger revenue rose 162.8% YOY to $8.4 billion, comprising nearly 89% of total quarterly revenue.

Cargo revenue

Cargo revenue includes revenue generated from cargo transport of any kind by American Airlines. The company has adapted to the pandemic by launching its first cargo-only flights since 1984. These flights have transported millions of pounds of critical goods, including the COVID-19 vaccine.

Cargo revenue is significantly less than American Airlines' passenger revenue. For Q4 FY 2021, cargo revenue rose 19.6% YOY to $341 million, comprising about 4% of total quarterly revenue.

Other revenue

Other revenue is comprised primarily of the marketing component of mileage sales to co-branded credit cards and other partners as well as other marketing-related payments. As part of American Airlines' member loyalty program, the company sells mileage credits to credit card companies, airline partners, and various other business partners. Other revenue also includes revenue generated from airport clubs, advertising, and vacation-related services.

For Q4 FY 2021, other revenue rose 27.5% YOY to $704 million. It accounts for approximately 7% of companywide revenue.

American Airlines' Recent Developments

On Dec. 14, 2021, American Airlines announced the nine-person senior leadership team that will report to Robert Isom when he becomes chief executive officer (CEO) on March 31, 2022. Isom is currently president of the company. Several changes were made to the senior team, including the addition of Priya Aiyar as senior vice president of corporate affairs and chief legal officer, and David Seymour as senior vice president and chief operating officer (COO).

On Dec. 7, 2021, the company announced that CEO Doug Parker would be retiring on March 31, 2022. As noted above, President Robert Isom will replace Parker, who is expected to continue to serve as chairman of the company's board of directors.