Key Takeaways
- Jefferies upgraded AAL price target from $12 to $13 while maintaining Hold rating
- First quarter unit revenue jumped 7.6%, with second quarter projected at 9.5%–10.5%
- Company launched $1.14 billion aircraft-backed bond offering
- Rising fuel expenses threaten profitability, with potential 2026 losses forecasted
- BMO Capital lifted target to $13.50; Evercore maintains $14.00 objective
American Airlines delivered first quarter results that surpassed Wall Street expectations, reporting a loss of $0.40 per share compared to analyst projections of $0.47. The carrier’s quarterly revenue reached $13.91 billion, exceeding the consensus estimate of $13.79 billion.
American Airlines Group Inc., AAL
The airline’s unit revenue climbed 7.6% during the opening quarter. Management projects second quarter unit revenue expansion between 9.5% and 10.5%.
Following the earnings announcement, Jefferies analyst Sheila Kahyaoglu increased her price objective on AAL from $12 to $13. However, she maintained her Hold recommendation on the shares.
AAL is presently changing hands near $12.10, trading beneath InvestingPro’s Fair Value calculation of $14.05. This discrepancy indicates potential undervaluation at present price levels.
Jefferies established its full-year EPS projection at $0.10, falling within the carrier’s broad guidance spectrum of -$0.40 to +$1.10. The research firm highlighted opportunities for improved margin results under favorable operating conditions.
BMO Capital similarly elevated its price target, advancing from $12.00 to $13.50. BMO emphasized an improved yield environment and noted that first quarter performance exceeded projections.
Raymond James maintained its Market Perform stance, recognizing advancement in narrowing the margin differential with traditional competitors. Evercore ISI preserved its In Line assessment with a $14.00 price objective.
$1.14 Billion Aircraft-Backed Bond Deal
This Monday, American Airlines initiated a $1.14 billion bond issuance to fund the acquisition and financing of 32 aircraft, including both new deliveries and existing fleet members. The transaction utilizes enhanced equipment trust certificates, commonly known as EETCs.
The primary component consists of a $905 million offering featuring an average maturity of 7.7 years. Initial pricing discussions center around a yield near 5.625%.
EETC structures enable airlines with below-investment-grade ratings to tap investment-grade debt markets by pledging aircraft as security. While S&P assigns AAL a B+ corporate rating, four levels below investment grade, the longer-dated bonds in this offering are anticipated to receive an A rating from S&P.
Goldman Sachs, MUFG, and Morgan Stanley serve as lead underwriters for the bond transaction.
Escalating Fuel Expenses Pressure Margins
Surging oil prices continue to compress profit margins throughout the airline industry. Fuel represents one of American’s most substantial operating expenses.
The previous week saw the company reduce its annual earnings forecast. Management cautioned that the carrier might finish 2026 with negative earnings after absorbing approximately $4 billion in incremental fuel expenses.
American additionally postponed $300 million in aircraft delivery capital spending from 2026, creating additional financial flexibility.
The carrier intends to expand capacity by approximately 4% this year, roughly double the industry-wide growth rate. Jefferies suggested that given current macroeconomic conditions, further reductions to the capacity expansion plan may prove necessary.
According to InvestingPro intelligence, ten analysts have revised their earnings forecasts downward for the coming period.
AAL shares declined approximately 2.4% on Monday as investors processed the bond offering announcement and earnings implications.
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