American Airlines (AAL) - 2025 Goldman Sachs Industrials Conference
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American Airlines Group Inc. – Goldman Sachs Industrials Conference
Date: December 3, 2025
Location: Goldman Sachs Industrials Conference
Management Present:
Devon E. May – Executive VP & Chief Financial Officer
Executive Summary & Key Themes
Devon May delivered a highly optimistic outlook for 2026, emphasizing balance sheet progress, premium product expansion, regained sales distribution share, and strong cost performance. The tone was materially upbeat relative to 2025’s macro headwinds, with clear confidence in unit revenue trajectory, fleet modernization, loyalty economics, and network growth across key hubs.
🔹 Financial Performance
(Required Section)
Key insights and quotes:
2025 exceeded expectations on costs despite macro softness:
“We hit our cost guide… we will hit our cost guide for 2025 that we started the year with.”
“Year-to-date, we have outperformed the other premium global airlines” on unit revenue.
Government shutdown + FAA reduction caused a temporary booking hit:
Impact included “less than $1 million a day” in government travel losses and then slowing bookings once “FAA mandated cancellations… around November 7.”
Bookings have since recovered:
“It has since come back. Bookings are coming in as we would expect right now.”
Strong operational execution and capacity adherence:
“We continue to hit our capacity targets.”
Fleet deliveries underpin a healthier revenue mix:
11 new 787-9 premium aircraft delivered by year-end.
🔹 Guidance & Future Trends
(Required Section)
2026 issues are largely behind the company:
“I don’t think there’s much that’s going to bleed over… we’re excited to get to the year.”
Bookings for 2026 are precisely in line with expectations:
“Our booked revenue… is exactly what we expected 6 weeks ago.”
Premiumization remains a multi-year margin tailwind:
“If we had more [premium cabins] today, we’d be more profitable today.”
“Premium cabins… inevitably are our most profitable cabin on every fleet.”
Network trends set up favorably for 2026:
“Domestic was down this year… but there’s absolutely a great setup for next year.”
Macro uncertainty that hurt domestic in 2025 “should be behind us.”
🔹 Capital Allocation & Balance Sheet
(Required Section)
Debt reduction ahead of schedule:
“We hit our first target… to reduce [debt] by $15 billion… we achieved that in 2024.”
Target: “Total debt below $35 billion by the end of 2027.”
Leverage goals:
Getting to <3× net debt/EBITDAR would support a BB credit rating.
“Let us hit that $35 billion first… then we can decide exactly what capital deployment is going to look like.” (Shareholder returns deferred.)
CapEx expectations:
Aircraft CapEx remains $3–3.5B annually with ability to grow ~5% per year.
Non-aircraft CapEx (clubs, product, interiors) $1–1.5B.
🔹 Cost Structure & Efficiency
Labor costs rising modestly but manageable:
Pilots get 4% increases, flight attendants 3%, and most CBAs have escalators above inflation.
No major step-ups expected in 2026.
Airport rents/fees a universal industry headwind:
“It’s going to be something that’s outside of inflation that impacts everybody.”
Efficiency improvements driven by technology, not work rules:
“It’s not work rule changes… it requires investment in technology… and process improvements.”
Large transformation effort (“reengineering the business”) showing measurable productivity gains.
Mainline capacity vs headcount improvement:
Capacity up ~6% (2023–25) while headcount up ~1%, evidence of sustained productivity gains.
🔹 Fleet, Network Strategy & Premium Expansion
Fleet in strong shape; no retirements looming:
“Our fleet is in incredible shape… no retirements coming up.”
A321XLR will be a high-impact aircraft supporting transcon + Europe growth.
20 additional 787s coming by 2030; options for 25–30 beyond that.
Premium configuration rollout:
20% more premium seats and 50% more lie-flat seats by 2030.
“If we had more of it today, we’d be more profitable today.”
Reconfiguring 777-300ER, 777-200, A319, A320 to add premium inventory.
Network growth markets for 2026:
Chicago returning to 500+ daily departures.
Philadelphia, Miami, Phoenix all expanding, with Phoenix targeting 300+ departures.
LAX and DFW growth gated by terminal construction but poised for multi-year expansion.
🔹 Loyalty & Commercial Initiatives
Citi co-brand agreement is a major P&L uplift driver:
Remuneration grows ~10% per year, from $5.5B → ~$10B by 2030.
Adds ~$1.5B incremental EBIT by decade end.
“It may not flow exactly $300 million a year… but close to that.”
Sales/distribution recovery complete:
“We’re coming out of this year effectively having regained our fair share.”
Incremental share gain is the next objective.
10 Notable Direct Quotes
“We are really excited about 2026… we think the company is incredibly well set up.”
“We hit our cost guide for 2025… and continue to be a leader in cost efficiency.”
“Bookings slowed pretty materially… but have since come back.”
“Our booked revenue for 2026 is exactly what we expected 6 weeks ago.”
“Premium cabins are our most profitable cabin… on every fleet and every entity.”
“Our fleet is in incredible shape… no retirements coming up.”
“Remuneration will grow at about 10% a year… reaching ~$10B by the end of the decade.”
“We fully expect to be below $35 billion of total debt by the end of 2027.”
“We have the best U.S. domestic network… there’s absolutely a great setup for next year.”
“The hard product on our widebodies is the best amongst U.S. premium global airlines.”
Q&A Summary
Q: Catherine O’Brien (Goldman Sachs) – What went better than planned in 2025 despite macro challenges?
A: Devon highlighted strong cost performance, regained revenue share, leading unit revenue outperformance vs peers, and successful fleet induction (787-9P). He emphasized that these achievements set up 2026 well.
Q: Any 2025 issues that will carry into 2026?
A: No. Government shutdown effects were temporary and bookings fully recovered. 2026 bookings are tracking in line exactly with expectations.
Q: Cost outlook for 2026 and medium-term pressures?
A: Labor inflation is modest; airport rents/fees rising industry-wide; maintenance variability but not a major headwind. Efficiency remains a multi-year structural strength.
Q: Drivers behind workforce productivity improvements?
A: Technology and process investments, not work rule changes. Company-wide transformation effort turning “reds and yellows” into “greens.”
Q: Fleet order book—any gaps?
A: Current order book covers needs well into the next decade; eventual widebody order needed to replace 777-200s but not urgent.
Q: Premium cabin expansion—margin impact?
A: Premium is the highest profit per square foot; reconfiguration of widebodies and narrowbodies will be a major margin tailwind for several years.
Q: Loyalty economics from the Citi agreement?
A: About $300M incremental EBIT annually on average; remuneration roughly doubling by 2030.
Q: Leverage target & shareholder returns?
A: Focus remains debt reduction until hitting $35B total debt and ~3× leverage. Shareholder returns considered only after that milestone.
Q: What drives incremental revenue share beyond regained historical share?
A: Network upgrades (Chicago, Philly, Phoenix, MIA), premium product improvements, frontline service, and improved operational reliability.
Q: Growth opportunities in 2026?
A: Biggest expansions: Chicago, Philly, Miami, Phoenix. LAX and DFW expand over a multi-year horizon as terminal projects finish.
Q: Downside flexibility—how quickly can CapEx or growth be adjusted?
A: Aircraft flexibility is high via retirements, leasing, utilization. Non-aircraft CapEx could be trimmed around edges but core premium reconfigurations would continue.
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