American Airlines followed its peers by commenting on the general softening in demand due to the current economic uncertainty and withdrawing full year guidance. American’s CEO Robert Isom noted however that should current demand trends continue, he expects the airline to deliver a “profitable year and produce positive free cash flow”.
American produced first-quarter revenue of $12.6bn. Total unit revenue was up 0.7% versus the first quarter of 2024, driven by continued strength in international unit revenue, which was up 2.9% year over year on 0.8% lower capacity year over year, and continued growth in premium and loyalty revenue. Isom noted on the earnings call that paid load factor in the airline’s premium cabins remained at “historically high” levels up 2.9% over the prior year period. Loyalty bookings too were up 5% year on year and Isom pointed to the increase in Advantage members that account for 76% of all premium cabin revenue.
American reported a first quarter 2025 GAAP net loss of $473 million loss, excluding special items, the loss was $386 million. Unit revenue was up but first quarter costs rose 7%.
Devon May, CFO of American, said that the airline was continuing to pursue savings via an efficiency drive and productivity despite headcount remaining flat. “We expect to achieve approximately $250 million in cost savings in 2025 on top of the $500 million achieved last year,” he said.
American expects to take delivery of 40 to 50 new aircraft this year that equates to an expected capital expenditure of $2-2.5bn, which includes used aircraft and spare engine purchases as well as net PDPs.
American ended the first quarter with $10.8bn of total available liquidity and produced free cash flow of $1.7 billion in the quarter. The company has been working hard to reduce its debt burden. The airline strategically repriced its $2.3 billion Advantage-backed term loan, lowering the interest rate by nearly 300 basis points and improving the amortisation profile, pushing out $1.9 billion of amortisation over the next three years into 2028. May noted that the airline had reduced its total debt by $1.2 billion during the first quarter. “We now have more than $10bn in unencumbered assets and more than $13bn in additional first lien borrowing capacity,” he said, adding that its balance sheet was “stronger than it has been in nearly a decade” and American is committed to reducing total debt to less than $35bn by year end 2027.
The airline is predicting the economic uncertainty to continue to impact sales into the second quarter. American expects second quarter revenue to be down 2% to up 1% year over year, as it anticipates softness in the domestic main cabin, but May noted that he expects this to be partially offset by the continued strength of long haul, international and premium bookings and via “additional progress in recovering revenue through our indirect channels”.
Isom remains confident for the rest of the year. “Travel always comes back,” he said, adding that American was in a solid position to capitalise on the bounce back in demand having already refleeted and made significant progress in deleveraging and securing its financial position.
Answering an analyst question on whether the airline would absorb the additional tariffs, Isom said categorically that “aircraft cost too much already” and that paying more doesn’t make sense and not something the company intends to absorb. Luckily the airline doesn’t have any near-term deliveries but towards the end of the year the question will become more pressing. Isom seemed confident that the aviation sector, which he noted produces the largest level of exports and largest surplus than other industries, should remain a powerhouse of the US economy that he indicated meant a return to a zero tariff environment.