American Airlines latest annual revenue figures are in and the paltry bonuses for staff reflect just how out of touch management is, especially amongst peers.
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Another Lackluster Year For American Airlines
American closed out yet another year where it lost money from flying people and things. From a revenue standpoint, several quarters achieved record revenue, and the year as a whole was the largest ever for American. That said, on more than $3bn in revenue from the loyalty program which has incredibly high margins, the airline still saw a very lackluster year, in line with 2023 while competitors grew.
The key stats for me are the following:
- Record fourth-quarter revenue of $13.7 billion and record full-year revenue of $54.2 billion
- Fourth-quarter and full-year GAAP net income of $590 million and $846 million, or $0.84 and $1.24 per diluted share, respectively
Then these three pieces are particularly noteworthy:
“American achieved its total debt reduction goal of $15 billion from peak levels in mid-2021 — a full year ahead of schedule. The company remains focused on debt reduction as it works toward its stated credit ratings goal of BB.”
“Based on present demand trends, the current fuel price forecast and excluding the impact of special items, the company expects its first-quarter 2025 adjusted loss per diluted share4 to be between ($0.20) to ($0.40). The company expects its full-year 2025 adjusted earnings per diluted share4 to be between $1.70 to $2.70.” and;
“Cash remuneration from co-branded credit cards and other partners was $6.1 billion in 2024, an increase of 17.0% versus 2023. Cash remuneration in 2024 included a one-time cash payment related to the new co-branded credit card agreement announced in December.” – American Airlines
What should be most concerning is that despite a bigger credit card deal with just Citi vs split between Citi and Barclays, it doesn’t appear that the deal will make much of a dent in the financials and it remains miles away from Delta and American Express.
Looking forward, American both achieved its debt reduction milestone and forecasted a Q1 2025 loss as well as a $1-1.5bn profit next year – not dissimilar to how 2024 started out. With the lowest debt levels in years, a new card co-brand deal signed, and coming off its best year ever, American should be poised for its best year in recent memory. And yet, it’s forecasting roughly what it did in 2023 (and fell short) and 2024 (and fell short.)
Comparing To Peers
Looking at Delta Air Lines, United Airlines, Southwest Airlines, and Alaska Airlines; American Airlines might as well have offered nothing at all.
- Delta Air Lines profit shared $1.4bn equal to 10% of employee earnings
- United Airlines profit shared $713MM on $4.2 bn pre-tax earnings
- Southwest Airlines profit shared $620MM or 5.6% of employee earnings
- Alaska Airlines profit shared $327MM + $22MM in operational bonuses earlier in the year
- American Airlines profit shared $20.55MM or 1.5% of total income of $1.37bn
Other carriers like JetBlue Airways have not reported full 2024 revenue but was likely to report a loss. Spirit is in bankruptcy, Allegiant reported a loss in Q3 2024.
To put into context the divergence between those numbers, for all the carriers it’s the largest ever paid (with the exception of American Airlines, of course.) But Alaska Airlines is especially strong, “Just a year ago after flight 1282 which resulted in one third of our mainline Alaska fleet being grounded and our operations severely disrupted, we were uncertain how the rest of the year would unfold.”
The Company Could Be Just As Generous, By Ratio
All other airlines were far more generous not just in the nominal amounts disbursed but also in the percentage permitted. American Airlines didn’t have to pay out more than Delta Air Lines to compete with the carrier, it only needed to pay out a similar percentage. Even if it were to match Southwest at 5.6%, the amount of money wouldn’t be staggering.
In fact, had American Airlines paid out the same 10% as Delta, the amount would have been just $84.6MM, less than what it saved ($100MM) through cutting costs in 2024. It could have paid the same bonus percentages as Delta just with its savings and had change left over.
But it didn’t.
This is really the crux of the issue. The carrier had an opportunity to grab a headline, to encourage its staff to cut more costs, to treat customers a little better, to work a little harder, and to give employees pride that they were working for a profitable airline that cares about them.
American Airlines’ Aadvantage program is highly successful. Perhaps even more so following the implementation of loyalty points and spending towards status qualification or Aadvantage million miler status. This is a method for which United has somewhat followed suit, and Delta has had something similar in place for some time. Travel on American Airlines loses the company money every single time it takes off and lands, but the program carries it. While the airline is expanding flying this year with more destinations and greater frequencies to Europe, it should actually shrink the business and focus more on the loyalty program.
Consider for a moment that American Airlines CEO, Robert Isom, earned more than $31MM in 2023. But even if he earned 1/3rd less he would still make more than the company profit shared with its employees. He was called out last year by flight attendants amidst a tense contract negotiation, but continued to earn relatively the same as Ed Bastian who runs a much more profitable, much more reliable carrier seems out of touch. Pilot union management has taken note:
“We perform the same essential service for the same rates of pay as our peers at Delta and United, yet our total compensation trails theirs thanks to American’s lagging financial performance,” Silva said. That’s unacceptable, and one way or the other, it needs to change.” – Forbes
What’s particularly interesting is that the other carriers seem to suggest they thrive because of their employees while American highlights cost cutting and management changes rather than employee success.
If American Airlines’ bonus program paid 10% of pre-tax earnings, it would still distribute less than half of Alaska, less than a quarter of Southwest or United, and 90% less than Delta but would demonstrate that it valued its employees to the same degree as the best-performing carriers in the country.
Conclusion
The best part about paying employee bonuses as tied to profit is that if American Airlines continues to struggle, it doesn’t really cost American many more dollars. However, it’s possible that if staff felt that management perceived them as important as Delta sees its staff, employees would be more engaged in getting the tide turned. This should have been American’s best year ever as it was for its peers. Next year, with even less debt on the books and a new credit card deal done should be a dramatic departure from the current state of affairs but it’s forecasted for more of the same.
When will investors and shareholder get serious about leadership at the company? When will they look across the table at Delta, Southwest, Alaska and United all embarrassing American Airlines in the same markets with the some struggles? And when will management look to staff and understand that it’s hard to recruit, keep, and be the best in the business if you clearly don’t make it a priority. If all parties vote with their dollars, perhaps 2025 will be a year of real change at the carrier.
What do you think?
American Airlines employees rip each other off. The CEO does, as is in this article. The FAs with more seniority really rip off the less senior FA. The ones with seniority are lazy but get paid much more. They should get a pay cut and the pay redirected to those with little or moderate amounts of seniority. FAs stop getting better after 5 years of experience and get worse after 15 or 20 years.
You do realize that all airlines in the us work on seniority right? Delta , United are exactly the same template. Therefore your argument does not hold water
AA FA are unionized…so is all of the other airlines. Their payscale is based on contract negotiated by the unions. The longer you stay with the company the more seniority they accumulate and the pay increases automatically till they reach the top of the scale. The company cannot reduce pay for some and reduced it for others. The company has to adhere to the binding legal contract negotiated by both.
DL is not unionised but your pint on AA’S buffonery is well taken.
Which means in 5 years you will also get worst. Sooo there’s that. I’m not a FA just using your words.
Your calculation of the AA profit sharing pool is incorrect. The 1.5% is based on an employees eligible earnings so one can calculate their individual amount. That 1.5% doesn’t directly translate to 1.5% of earnings. Profit sharing (excluding FA due to their contract being ratified mid-year) is 10% of pre-tax earnings. The 20% is irrelevant since that threshold wasn’t reached.
The contribution is 5% of the adjusted pretax income from Jan thru Sept and 10% adjusted pretax income from Oct thru Dec.
What they don’t tell you is how they calculate the profit sharing pool from their adjusted pre-tax income and how it relates to the other airlines. There is alot of turns, smoke, and confusing jargon to keep people ignorant of their decisions. The bottom line is that Delta runs a way more profitable company with less employees.
Sometimes CEOs deserve their high compensation, sometimes not. (My big problem is not tying compensation to long-term performance.) However, the optics of “here, everybody, share your bonus that’s ⅔ of what I make” is terrible.
AA CEO needs to be replaced. Year after year the company keeps failing but he keeps getting rewarded for failure.
AA need to be actively flying their own routes instead of passing it off to One World carriers.
United flies very route despite their partners flying the routes. It’s still a competition and United is not shying away from it but AA runs from it
Correct me if I’m misunderstand this: JAL has a problem that the top brass accept blame for just because they’re competent leaders while American’s CEO is making more money than is being provided in bonuses for employees of the entire airline? This while American’s CEO – along with Bastian and Kirby – refuse to accept any personal blame when things go wrong under their “leadership”? If things go right and management accepts credit for that then management needs to accept blame when things are bad. To shirk that is just pathetic, which is about right for the Big 3 USA airlines.
The CEO compensation of only $31M seems a bit low in comparison to revenue. The problem is over staffing of FAs who take on little to no responsibility. The FAA needs to reduce the number of required FAs per passenger . Most passengers are fully capable of going into a galley , fixing a meal or something to drink , using an oven , pushing a cart , throwing trash away , bussing dishes and utensils themselves.
You can expect mass staff reductions in the next ten years as AI and automation technology is implemented. There is also a need for only one pilot on domestic flights and two on international flights (one to fly and one for relief ).
Most passengers are not capable of doing anything an airplane, they can’t even figure out how to open the lav door. And there mainly for your safety that’s why there is minimum crew required per set number of passengers. AI won’t be able to do anything in case of an emergency, it will more than likely shut down. The fact is AA has always been cheap on its hardworking employees since the US Air invasion.
UScare merged with America Worst which morphed into American. Kinda like the merger of McDonnell Douglas with Boeing and Harry Stonecipher (M-D) declared that Boeing was going from an engineering company to a profitable company. Two titans of the aerospace industry have ruined their reputation and staff morale. So, Harry…Mr. Isom…how’s that workin’ out for ya, huh?
I’m down with your thoughts on having fewer attendants on board since they really don’t give good service and they’re quick to remind us of their main purpose is for safety. However, I’m not down with having only one pilot in the cockpit. Let’s hope we never see that day, not sure where your head was on that one. Be careful what you ask for!
You’d be amazed to find out that lower management got 1% and the flight attendants got 1.1%. Amazed they just gave maintenance and related a raise to encourage more new employees to jump on board at American but then they pull this stunt profit sharing? Insane.
Robert Isom should be fired at once. He is the laughing stock at AA and the industry as a whole. What a joke!
AMEN!
In regard to the credit card revenue-agents are put on notice if the credit card isn’t offered to passengers that call in. If I am already upset because of a delay, or canceled flight, I certainly don’t want to hear about earning miles for travel on an airline like this
You’ve been the CEO of how many airlines? I’m not questioning your right to have an opinion. I’m simply questioning your credentials.
Simple AA upper mgt. logic. Anyone below them are simply the hired help: Clear longstanding contempt for the little people.
Much of this comes through the culture of Doug Parker, —-trained and brainwashed by Bill Franke.
Passive aggression at its ‘boardroom finest’ .
CEOs will never change. They are totally out of touch with those of us on the front lines. They only care about their exorbitant paycheck and golden parachutes.
When Jerry Grinstein took over Delta and fired Leo Mullin, things started to turn around. The employees could either get on the bus and work with us or “thank you very much for your service”. Jerry, Ed & Glen PROMISED those that stuck with the airline’s drastic pay & benefit cuts would be rewarded for their hard work. Every benchmark that Delta set for itself was above what the DOT wanted. For every benchmark that was met or exceeded, every employee got $25. Sounds paltry but that showed commitment. To a high salary employee, that $25 was a smaller percentage of the salary as compared to a lower salary employee. The point was…EVERYONE got the same size piece of the pie. When Delta made a profit, EVERY employee got a piece of the pie. As the profits got bigger, the pie got bigger as did the payout. The payout is given on Valentine’s Day. And you gotta wonder why the unions want in…so they can steal that pie.