American Must Explain Why Delta And United Get 100% Of Industry Profit

Once again, American Airlines executives will have to defend themselves on an earnings call. The familiar charge is that American is a distant third in the competition between the three global U.S. airlines.

On Delta’s Oct. 9 earnings call, CEO Ed Bastian said, “We expect 60% of the overall industry profits to be driven by Delta Air Lines. Expect the rest of it probably to be driven by United, largely. And then you have everybody else, and this is not a new phenomenon.”

Then on United’s Oct. 16 call, CFO Mike Leskinen said, “The industry now has two brand loyal, structurally profitable and revenue diverse airlines, which together will represent about 100% of industry profits in 2025.”

The thesis leaves little space for American to report a profit when it releases earnings on Thursday, Oct. 23. The Zack’s consensus estimate is for the carrier to post a per share loss of 27 cents.

American Seems Trapped in Bronze Metal Syndrome

As for pre-tax margin, closely watched in the big three comparisons, in the third quarter Delta reported 9.8% and United reported 7.8%. American is expected to continue to trail both. In the second quarter, its pre-tax margin was 5.8%, compared with 11.6% at Delta and 11% at United.

In fact, American has long been trapped in bronze metal syndrome. Year to date, as of Thursday’s close, United shares were up 3%, Delta shares were up 2% and American shares were down 30%, with the S&P 500 Index up 13%.

American also trailed in 2024, as United shares rose 135%, while Delta rose 50% and American rose 27%, while the S&P 500 Index gained 23%.

Airlines Are Focused on Premium Seating

For now, the guiding principle in airline management is to enhance revenue from premium seating, particularly premium leisure seating, as rich people keep flying, often to more exotic destinations. “We’ve seen the growth of premium leisure and the yield quality accelerate really fast,” said Andrew Nocella, United chief commercial officer, said on the carrier’s third quarter earnings call. “And when we look at it across our domestic system, we find, in fact, the quality of premium leisure business often exceeds that of traditional corporate business,” long the primary source of airline profits.

What Will American Say On Thursday?

“I expect American to echo Delta and United talking points, leaning on premium, corporate and international resilience to help offset weaker domestic main cabin demand,” said Jay Cushing, senior bond analyst for Gimme Credit, in an email.

“American skews more heavily domestic (~70%) than DAL and UAL (~55%) so I expect them to highlight leverage to eventual domestic recovery,” Cushing said. “I expect them to highlight reduced domestic industry capacity into 4Q25 as a possible catalyst for firming domestic RASM.” RASM is revenue per available seat mile, a common industry metric.

“American may also look to trim some of its own unprofitable capacity to help stabilize and maybe narrow the wide profit margin gap vs DAL/UAL,” Cushing said.

Dennis Tajer, spokesman for the Allied Pilots Association, which represents 16,000 American pilots, said, “American will likely say they are doing all the things they are supposed to be doing; they are just years behind.

“They will say it will take time and there’s a path ahead,” Tajer said. The questions are ‘Is that path straight or winding?’ and ‘How long will it take?’”

Here are three points American could address on Thursday:

– American signed a credit card deal with Citibank in December 2024. The deal, which takes effect in 2026, eliminates Barclay’s as an issuer of American cards, giving Citibank exclusivity. That should enable the bank to fully compete with American Express and Chase, who issue Delta and United cards respectively.

– Dominance in Latin America, enabled by its Miami hub, gives American an outsized presence in the region, which could be a third quarter advantage. Latin America was a sore spot for United in quarter, with revenue down 5% to $1.1 billion and passenger revenue per available seat mile down 10.7%. “Results for Latin were disappointing,” Nocella said on the call, citing ”elevated year-over-year capacity in the region,” particularly in close-in markets in Mexico and Central America, served primarily from the Houston hub. By contrast, “Deep South flying is setting up for a nice peak season.” Delta said Latin America revenue declined 3% to $759 million, while PRASM was flat.

-American said last week that starting next year, it will introduce the Airbus A321XLR — an ultra-long-range version of the A321neo — into trans-Atlantic service. “The A321XLR has a range of up to 4,700 nautical miles, opening up a world of new opportunities for American and its network,” American said in a press release. The first route will be New York-Los Angeles. “More details about American’s A321XLRs will be shared soon, including the new aircraft type’s initial international destination,” the carrier said.