How American Airlines Makes Money

Passenger revenue is rebounding due to increasing travel demand

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 airlines' capacity levels remain below pre-pandemic levels.

American Airlines' Financials

American Airlines announced in October financial results for Q3 of its 2021 fiscal year (FY), the three-month period ended Sept. 30, 2021. The company posted net income of $169 million, a significant improvement from the net loss of $2.4 billion in the year-ago quarter. Revenue for the quarter rose 182.7% year over year (YOY).

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. However, the fast-spreading Delta variant of the coronavirus has slowed American Airline's revenue recovery.

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 Q3 FY 2021, passenger revenue rose 213.3% YOY to $8.0 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 in more than 35 years. These flights have been used to transport millions of pounds of critical goods, including the COVID-19 vaccine.

Cargo revenue is significantly smaller than American Airlines' passenger revenue. For Q3 FY 2021, cargo revenue rose 60.4% YOY to $332 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 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 Q3 FY 2021, other revenue rose 59.6% YOY to $680 million. It accounts for approximately 8% of companywide revenue.

American Airlines' Recent Developments

In the company's quarterly filings for Q3 FY 2021, American Airlines said that its capacity, as measured by available seat miles, continues to be significantly impacted by the pandemic. Its domestic capacity levels in the third quarter were down 4.7% while international capacity was down 45.9% compared to the third quarter of FY 2019, before the outbreak of the coronavirus.

Article Sources

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  1. American Airlines Group Inc. "Annual report for the fiscal year ended December 31, 2020," Pages 7-8. Accessed Mach 22, 2021.

  2. American Airlines Group Inc. "Form 10-Q for the quarterly period ended September 30, 2021," Page 12. Accessed Oct. 21, 2021. 

  3. American Airlines Group Inc. "Form 10-Q for the quarterly period ended September 30, 2021," Page 18. Accessed Oct. 21, 2021.

  4. American Airlines Group Inc. "American Airlines Reports Third-Quarter 2021 Financial Results." Accessed Oct. 22, 2021.

  5. American Airlines Group Inc. "Annual report for the fiscal year ended December 31, 2020," Page 54. Accessed March 22, 2021.

  6. American Airlines Group Inc. "Annual report for the fiscal year ended December 31, 2020," Pages 161-163. Accessed March 22, 2021.

  7. American Airlines Group Inc. "American Airlines Reports Fourth-Quarter and Full-Year 2020 Financial Results." Accessed March 22, 2021.