American Airlines’ ever higher pile of debt may never be paid off, meanwhile investors continue to support Isom, and give management a pass. Why?
American Airlines Q3 2025 Earnings Call Lowlights
American Airlines reported in its third quarter 2025 (Q3) earnings call that it had lost less money than the prior quarter, and much less money than in the first quarter.
- American lost $119MM in Q3 2025 compared to $159MM in Q2
- In 2024, Q3 was a $205MM profit
- Total profit for the year (2025) now stands at $12MM on $40.69bn or a 0.02% profit margin
- Management believes its efforts are starting to pay off in cost cutting and focus on premium markets, by losing less than the prior quarter.
- The airline expects to pay down some of its $36.8bn by the end of 2027 to get it down to $35bn.
The Street Likes The “Turn Around”
The power brokers and market makers rewarded this incredible turn around story by finishing the week up 15.51%. For money managers that could also just load up on more of United and Delta Air Lines chose to bet big on American’s less bad quarter decided they hate money instead and piled into more American Airlines stock. It’s entirely possible that the thought is that this is a turning point of sorts for American, but if so it seems less substantial to this writer than perhaps as American management has sold it.
The Crushing Debt Load
American Airlines has a few problems. First, it only makes money from its loyalty program losing money from flying people and things. I used to qualify that by quarter, but it’s been so long since American made money on its whole business that no qualifier is necessary any longer. This isn’t entirely unique for US airlines which as a group remain the most profitable in the world but American has been particularly poor performers in the last two decades.
The carrier also struggles with product, removing screens from seat backs, and trailing in updated premium seats and lounges behind peers at Delta and United which have compelling offerings.
But the debt, oh the debt. American Airlines’ current debt load is $36.8bn. Last year, the carrier reported $846MM in net income for the year on $53bn in revenue. For comparison, Delta Air Lines holds $15.6bn in debt, has similar revenue, and made more than $4bn in profit last year. United had slightly lower revenue figures but still earned more than $4bn and holds $25bn in debt (with a former American executive at the helm the last couple of years.
Southwest, the fourth largest carrier in the world’s largest air market had half the revenue (just over $25bn) but holds only $5bn in debt. Southwest was the target of a hostile investor group that reshaped the carrier on the basis of poor performance, and yet the carrier mirrored American’s figures with just over half American’s 2024 profitability.
The problem with American’s debt is that at its current repayment rate, the airline will have to perform well and apply excess earnings to payments. When Doug Parker and crew took over the (then) world’s largest airline in 2013, the carrier had paid down its debt from $14.4bn in 2005 to $7.2bn. That debt jumped to $18bn the next year and when he left in April of 2023 it had risen to $37.2bn.
On paper, the airline plans to pay it off in 12 years but that assumes that American performs to its own expectations. But it almost never does. In 2023 the carrier forecast earnings per share to reach $3.00-3.25, it ended the year at $.29/share. In 2024 it forecast a profit of $2.25-3.25/share (a massive spread), it closed the year at $1.70/share. Both 2023, and 2024 were record revenue years for the airline. In 2025, it forecast $1.70-2.70 per share, revised that down to $.80 profit ranging down to a $.20 loss, and now back up to $.65-.95/share.
The point is simple: American rarely performs to its own expectations. Trusting the airline to pay down it’s debt on time is a fool’s errand. Management’s goal of paying debt down by just $1.8bn over the next five quarters is based on management’s unbridled optimism it will make money in the future. The problem is that there’s little history to back the claim. If American continues at its current pace, it’s possible the airline will never pay down its debt and it could grow even if the carrier is diligent about applying its meager profits to debt service.
Separating American’s Parts From The Whole
American’s Aadvantage program and Loyalty Points are one of the bright spots for the carrier. It’s been a cash cow (which ultimately gets slaughtered every year by atrocious financial management of actually running the airline) and it still has upside especially with Citi’s new Strata card. I’m personally an Executive Platinum member and find excellent value in its redemptions (when I can find saver space.)
The new premium focus looks great, though delivery may be another matter. The hard product (premium economy, business class seats) are improving and the fleet is being renovated, though its lounges lag in uniqueness, size, and premium quality from Delta and United.
The new Airbus A321XLR (it just received its first) will open up new options across the Atlantic and could replace some routes freeing widebodies that can be repurposed to even more new destinations.
It’s Time To Clean House
The current management group came from America West, an airline so dedicated to its no frills model its ticket symbol was LCC (low cost carrier.) That group then orchestrated a merger with US Airways in which it controlled the company, and deployed the same coup with American Airlines.
Its list of missteps include labor disputes that lasted half a decade without a contract. Then such deft negotiation that it gave the most generous pilot pay package in the history of the country, only to replace it a month later with a new contract 20% more expensive than the last.
While Delta was adding screens to seats, American was taking them out. United added a secret lounge in Newark and rolled out Polaris, Delta incorporated security processing into its lounges among myriad updates while American added a lounge within a lounge.
Delta, with comparable revenue, out earns American by billions and its not close; United does too on less revenue. Southwest – which was doing so poorly the last three years that it completely changed everything about the carrier’s USPs, collected $78bn in revenue against American’s $156bn (literally half) but earned $1.469bn over the period compared to American’s $1.795bn. Alaska earned a third of American’s revenue on just 80% less revenue over the same period.
Everyone in Management – everyone – has got to go. What remains an utter mystery is why shareholders accept this dismal performance quarter after quarter, year after year, but Wall Street cheers it on when it’s loses slightly less than expected.
There’s no upside to keeping them in place and it can’t possibly get worse.
Conclusion
American Airlines CEO, Robert Isom, and his cohort of America West colleagues have run up a possibly insurmountable debt load. Even while losing less than the prior quarter, the airline has earned a pittance for the year and has no meaningful signs of being able to forecast its performance accurately, nor making significant progress against its notes. In an optimistic world, where American was able to pay $1.8bn (principal) plus interest (in addition to principal) every five quarters it would still take 20-21 years to clear. And that assumes it performs every year which it has not had a history of achieving. Out with all of them, get serious executives in place, run an efficient airline, pay down some debt and grow the carrier.
What do you think?
‘Never say never,’ unless you’re the American Airlines CEO.
Ironically, $36.8 billion in corporate debt is nothing compared to the $38 trillion the USA has in gross national debt. Then again, it’s all kinda ‘made up’ anyway, so, instead of actually fixing anything, we’ll just keep doing whatever it is we do.
Totally unrelated; how nice we’re building our own Versailles in D.C. while the government ends food assistance. Let them eat their own bootstraps!
@1990 – Hey, those billionaires need tax cuts a lot more than normal people need food and medical care. If people want to go back to “the good old days” in the 1950’s where one working parent could support a family then we need to make it so that the rich are paying out like then. Remember how JFK lowered the top tax rate from 90%?
Funny hearing the “elites” here feign outrage for the “poor”. Liberalism at its core, people like many of posters here who believe they are special and most could never get where they did in life. And then complain about tax cuts that benefit them.
Face it, you don’t give a F about the typical lazy American but you certainly hate a man who has made most of our lives better financially.
Interesting that you think people caring about others is insincere. Kind of shows the person you are. I assume you dont identify as Christian, and if you do you are faking it
Can’t wait to visit the ballroom! My life will be complete and so much better. ; )
But did you ever get to play on Obama’s basketball court, which unlike the ballroom was paid for by taxpayers.
BDS is running rampant with the loony liberals. While they won’t open the government allowing poor babies to starve to death without their chips and soda.
Dave, you mean the basketball court that is also a tennis court? All that was added were hoops! No demolition, just hoops. Sounds like you have bad case of ballroom defense!
Well Dave, I’ve been poor. Have you? I pay a living wage at my small business that I opened over twenty years ago by working 80 hour weeks and destroying my credit because I didn’t have the money to make minimum payments on my credit cards. Even back then I would have cheerfully paid more in taxes to help other people. I understand, the weasels themselves feel differently but just how much does a billionaire need?
On the “elite” front, that’s kind of you to say I guess but since I’ve never been wealthy and want the rich to kick in their share as well (look up Warren Buffet’s secretary for example) I’m just a middle class guy who’s happy with what he has and wishes more Americans would be in a position to have a slice of The American Dream. Obviously you don’t feel that way.
Hopefully things turn around for you!
Cash pays debt. Quit only looking at the P &L statement and look at the cash flow. AA has been cash positive for quite some time now post-covid. P & L statements contain way more than the movement of currency in that quarter/year. There are write offs and depreciation. AA still has not reinstituted its dividend so the cash can go to the debt pile and not shareholders.
Indeed. AA is not a struggling enterprise (they recently have been less financially successful than Delta and United, though). Their cash flow is solid and since they announced a couple years ago that they would pay down their debt, they have consistently done so. Personally, I think they should continue to pay down their debt AND also restore a modest dividend, which would make the stock more attractive to potential shareholders. I would not be surprised to see them do this after they meet their current debt payment goal next year.
Mitch,
look at AAL’s income statement and see how much they are spending on debt service to how much they are reducing their debt.
They just are not generating enough cash to make a reasonable dent in their debt anytime soon.
and as much as everyone loves to put DL and UA in the same box financially, they simply are not. DL has made $1 billion more in profits so far this year than UA. UA has more long-term debt and a much heavier order book which is viewed as a liability to shareholders – because it is.
DL maintains less cash on hand because it has access to much larger lines of credit. It does not need to keep a bunch of cash around.
And let’s not forget that UA has yet to settle w/ most of the same unions that AA has settled w/; those same employee groups at DL are non-union and have received multiple pay raises post covid.
In reality, UA would be about halfway between AA and DL in financial terms.
but keep in mind that WN is not earning profits on par w/ DL or UA either. It just might be a Texas airline thing. WN does have a healthy balance sheet.
AAL stock posted a good rise over the past few days because the company is guiding to a strong 4th quarter – just as DL and UA are.
AA is regaining corporate travel and the elimination of lots of capacity by NK is helping the industry.
Thank you. The entire management team absolutely must go in favor of one with actual leadership and understanding that American can’t just cut costs to achieve profitability. Unfortunately and as a considerably more difficult step, I think the entire Board needs to go as well. Ever since the merger the Board has given tacit to fulsome approval to nitwits who obviously haven’t the faintest clue how to run a full service airline. That show stunning ineptitude or severe indifference and either is incompatible with staying on AA’s Board of Directors.
Under Parker’s leadership, AA spent $12+ billion on useless stock buybacks since 2014-ish. That’s at least 8x more than either United or Delta!
If AA didn’t waste $12+ billion, AA’s debt burden would be roughly the same as United’s at around $25 billion, LOL!
Parker thought he was a financial genius, as back then, servicing debt was cheap! What he didn’t anticipate was that borrowing costs could skyrocket! Now, Kirby can laugh at Parker, hahaha! United didn’t waste money the way AA did!
Still aiming to lower huge debt amid strong liquidity… Let hope and determination take flight!
Dr. Güntürk Üstün
Scott Kirby claimed that AAL’s Chicago hub lost $800 million annually. If Scott’s number is mostly correct, AAL would have resolve debt problem by either closing ORD or sell the hub to other airlines (e.g. Alaska or Jetblue)
Kirby also said that United is the best airline in the history of the world. Kirby is unfortunately known for spewing ridiculous assertions that have no basis in the real world. Be careful about using his statements as a basis for fact.
I do take Scott Kirby assertion with a grain of salt. However, Scott is likely correct that AAL is losing substantial amount at Chicago O’Hare, given how unimpressive AAL financial results compares with Delta and United.
The mystery to me is that Scott Kirby was there through much of that mismanagement at AA, and he was kicked out because of it (I suppose). He moves to Chicago and immediately becomes this seer who changed United from sure to fail to sure to challenge DL….the worldwide leader.
What happened?
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.” ― Theodore Roosevelt
It’s pretty sad to see people who are apparently rooting for a company to be liquidated and for thousands of hard working people to lose their livelihoods.