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 the 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.

Key Takeaways

  • American Airlines Group is a holding company that provides global and regional air transport services for passengers and cargo.
  • Passenger services account for the vast majority of revenue.
  • American Airlines has been badly hurt by the COVID-19 pandemic due to plunging passenger travel.
  • The company has adapted to the pandemic by sharply boosting its volume of cargo transport services.

American Airlines' Financials

American Airlines has been heavily impacted by the COVID-19 pandemic in the past year as customers have stayed at home and avoided domestic and international travel. The company posted a net loss of $2.2 billion in Q4 2020, ended December 31, 2020, compared to net income of $414 million in the same period a year earlier. Total operating revenue for the quarter plunged nearly 65% to $4.0 billion from $11.3 billion a year earlier.

The loss stemmed from plunging passenger volume, reflected by the drop in American Airlines' load factor from 83.8% in Q4 2019 to 64.1% in Q4 2020. Passenger load factor is an important measure of American Airlines' performance as it reflects the percentage of available seats that are filled with paying passengers. Another key passenger metric at American Airlines is revenue per available seat miles (RASM), a measurement of profitability. In Q4, revenue per available seat mile fell 34.8%.

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.

American Airlines reported 95 million passengers boarding its flights in 2020 as compared with 215 million passengers in 2019. This included roughly half as many passengers on regional flights for 2020 versus 2019.

Passenger revenue represents the largest portion of American Airlines' total operating revenue even though it fell 69% in Q4 2020 compared to the same quarter a year earlier. For Q4 2020, passenger revenue was about $3.2 billion, just over 79% of total quarterly revenue. For Q4 2019, passenger revenue represented about 91.5%.

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 in more than 35 years. These flights have been used to transport millions of pounds critical goods, including the COVID-19 vaccine.

While cargo revenue is significantly smaller than American Airlines' passenger revenue, it has grown dramatically in the past year. For Q4 2020, cargo revenue rose 32% YOY, comprising about 7% of total quarterly revenue, up sharply from 1.9% in Q4 2019.

Other Revenue

Other revenue is comprised primarily of the marketing component of mileage sales to co-branded credit card and other partners. 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 2020, other revenue fell nearly 27% as plunging passenger air travel affected the segment. But it still rose as a share of total revenue because revenue in the passenger segment fell more than twice as fast. In Q4 2020, the company reported other revenue of $552 million, or 13.7% of total quarterly revenue. That's up from 6.6% a year earlier.

American Airlines' Recent Developments

American Airlines said recently that it's very optimistic that corporate travelers will return as COVID-19 vaccines are distributed, though the company said how fast is unclear. While passenger volume has improved at American Airlines and the industry in 2021, it remains badly depressed. Many industry experts say it's unclear when corporate or international travelers will return in large enough numbers to boost volumes to normal levels. To conserve cash amid the pandemic, American Airlines has also taken measures including retiring several older aircraft types, deferring delivery of new aircraft, and furloughing employees.