American Airlines outlines $0.20–$0.80 FY25 EPS range as domestic demand softens, targets full indirect channel share recovery by end of 2025

Earnings Call Insights: American Airlines (AAL) Q2 2025

Management View

CEO Robert D. Isom reported “an adjusted pretax profit of $869 million for the second quarter or earnings per share of $0.95, which is toward the high end of the guidance we provided in April.” Isom highlighted “record revenue of $14.4 billion” and noted that “our year-over-year passenger unit revenue improvement led our network peers for the fourth straight quarter.” He stated that premium demand “remained resilient,” with the premium cabin unit revenue performing “4 points better than the main cabin.” Isom acknowledged weakness in domestic leisure, with domestic unit revenue “down approximately 6% year-over-year as softness in the main cabin persisted throughout the second quarter.” He said, “we expect that July will be the low point and that performance will improve sequentially each month in the quarter as industry capacity growth slows and demand strengthens.”
Isom discussed indirect channel recovery, stating “our indirect share now down 3% versus historical levels” and reaffirmed, “we remain on track to get back to our historical share of indirect channel revenue as we exit 2025.”
Isom provided updates on the AAdvantage loyalty program, noting “active AAdvantage members have grown 7% year-to-date” and spending on co-branded credit cards was “up 6% year-over-year.”
On the operational front, Isom said, “there was significant storm activity at our hubs… a 36% increase in disruptive operational events over the same period last year,” but credited “investments we’ve made in technology and our operations” with enabling rapid recovery.
CFO Devon E. May stated, “excluding net special items, American reported a second quarter operating margin of approximately 8% and earnings per share of $0.95, both at the high end of our guidance.” May credited “the team’s continued strong execution on our efficiency initiatives and a shift in timing of maintenance events to later in the year.” May added, “we expect to have driven cumulative savings of over $750 million and delivered approximately $600 million of working capital improvements since we launched our reengineering the business efforts in 2023.”

Outlook

May provided third quarter expectations: “we expect capacity to be up 2% to 3% year-over-year” and “third quarter revenue to be between down 2% and up 1% year-over-year.” He projected, “we expect to produce a third quarter loss per share of between $0.10 and $0.60.”
For the full year, May said, “we expect full year earnings per share of between a loss of $0.20 and a profit of $0.80, with the midpoint being a profit of $0.30 per share.”
May noted, “we believe the top end of the range is achievable if demand in the domestic market continues to strengthen, and we would only expect to be at the bottom end of the range if there was macro weakness that we don’t see in our recent booking trends.”

Financial Results

Reported “second quarter revenue of $14.4 billion was up 0.4% year-over-year.”
“Second quarter unit cost, excluding fuel and net special items, was up 3.4% year-over-year, over 0.5 point better than the midpoint of our guidance,” according to May.
American “ended the second quarter with approximately $38 billion of total debt and $29 billion of net debt, our lowest net debt levels since the third quarter of 2015.” The company “ended the second quarter with $12 billion of total available liquidity.”
May said, “we produced $791 million of free cash flow and have now produced $2.5 billion of free cash flow in the first half of the year.”
For the fleet, May stated, “we now expect to take delivery of 50 new aircraft this year at the high end of our previous range of 40 to 50 deliveries.” 2025 aircraft CapEx is “now expected to be between $2.5 billion and $3 billion, and our total CapEx is expected to be between $3.5 billion and $4 billion.”

Q&A

Jamie Nathaniel Baker, JPMorgan: Asked about the percentage of flights operating at a loss and paths to reducing loss-producing flying. Isom replied, “We don’t run our airline based on other airlines’ perceptions… the primary differentiator between us and some of our competitors is largely… we’re paying our team members at market wages… We do have a network… more oriented to the domestic network. The domestic network has been under stress… We think that’s going to change.”
Conor T. Cunningham, Melius Research: Queried about sequential improvement in U.S. domestic market and future earnings potential. Isom said, “July has been tough… as we take a look through the third quarter, we probably have about 65% of revenue on the books… a lot of optimism for some of the trends that we’re seeing going from July into August and September and into the fourth quarter.” May added, “July is going to look a lot like our second quarter results. But as we get into August and September, we’re going to see some nice improving trends.”
Catherine Maureen O’Brien, Goldman Sachs: Asked about capacity and unit costs versus January, and indirect revenue share. May responded, “This year is largely unfolding as we expected to start the year… At the midpoint, unit costs up probably somewhere around 3.5%.” On indirect share, Isom confirmed “as we exit 2025, we’re on track to getting — restoring our full indirect channel share.”
Atul Maheswari, UBS: Asked about margin gaps to peers and closing the gap. May noted, “There’s a gap today, and there will be a gap this year, but we do expect to close it heading into 2026.”
Other analysts raised questions on Chicago expansion, Embraer aircraft tariffs, network growth, corporate demand, customer experience initiatives, and the impact of weather disruptions. Management consistently emphasized ongoing efficiency, recovery in indirect channel share, and investments in premium and international growth.

Sentiment Analysis

Analysts pressed on domestic demand weakness and margin gaps, showing a neutral to slightly negative tone, particularly around domestic exposure and relative underperformance versus peers.
Management maintained a confident tone in prepared remarks, emphasizing resilience, efficiency, and recovery trends. During Q&A, tone shifted to a more defensive stance when addressing competitive challenges and margin gaps but remained optimistic about sequential improvement and indirect channel recovery.
Compared to the previous quarter, management’s confidence on indirect channel share recovery was higher, and analysts continued to focus on domestic weakness and competitive gaps.

Quarter-over-Quarter Comparison

Guidance in Q2 is more specific, providing a range for full year EPS, compared to guidance withdrawal in Q1.
Q2 call features stronger emphasis on indirect channel recovery and premium product expansion, with management stating plans to “restore our full indirect channel share” by year-end 2025.
Domestic revenue weakness remained a concern in both quarters, but management in Q2 projects sequential improvement and highlights international and premium strength.
Analysts in both quarters focused on capacity, margin gaps, and domestic demand, though in Q2, there was increased scrutiny on the path to closing the margin gap with peers.
Management tone in Q2 was more optimistic about operational recovery and efficiency, while still acknowledging competitive and demand headwinds.

Risks and Concerns

Management pointed to “significant storm activity” at several hubs, leading to operational disruptions and a “36% increase in disruptive operational events over the same period last year.”
Domestic leisure demand softness continues to pressure unit revenue, with Isom noting “domestic unit revenue was down approximately 6% year-over-year.”
May cited “the full financial cost of new collective bargaining agreements and a material drop in demand in the domestic market where we produce over 70% of our revenue” as major challenges.
Analysts flagged ongoing margin gaps to network peers, concerns about capacity growth, and exposure to domestic market volatility.

Final Takeaway

American Airlines management emphasized progress on efficiency and indirect channel recovery, with a renewed focus on premium products and operational resilience. While domestic softness remains a headwind, the company forecasts sequential improvement through the second half of the year and aims to restore full indirect channel share by year-end 2025. Management projects full year EPS between a loss of $0.20 and a profit of $0.80, pointing to premium and international segments as key drivers for future margin expansion and revenue growth.

Read the full Earnings Call Transcript