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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? 

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