What Could Have Been and What Might Yet Be

Research evidence excerpt

What Could Have Been and What Might Yet Be

IdeaMMgmt noted that just three weeks earlier it expected to guide to ~$1.5B

of FY26 pre-tax earnings (4x FY25 pre-tax income), highlighting that the

reduction in guidance was almost entirely driven by higher fuel costs rather

than weaker demand. Indeed, the difference in fuel vs. MSe/cons.

expectations was an ~$1.00 headwind to EPS expectations in 3Q.

4. The call focused on capacity growth and network strategy. Mgmt

reiterated that its fleet plan supports MSD capacity growth, although actual

growth will remain dependent on fuel prices and demand. If they grow

MSD, CASMx should increase LSD; lower growth would mechanically result

in somewhat higher unit costs. Mgmt stressed it will remain disciplined on

capacity, focusing on markets where it can generate the strongest returns

rather than pursuing growth for its own sake. The priority remains

recapturing share in core hubs—particularly PHX, PHL and MIA, where AA

historically held 3-7 pts more local share pre-pandemic—while optimizing

the network through initiatives such as the DFW 13-bank schedule, a greater

local focus at LGA, continued investment in Latin America, premium

international markets such as LHR, and deeper utilization of JV partnerships.

On other initiatives AAdvantage enrollments grew 30%+ y/y, surpassing

1Q's record pace, led by NYC, ORD and LAX, while Citi co-brand card spend

increased 8% y/y. Mgmt also noted AA has regained share across its hubs by

rebuilding ORD, growing PHL and PHX, and operating record schedules at

DFW and MIA.

5. AA continues to expect 48 aircraft deliveries and ~$4B of capex in FY26

(and closer to $4.5bn in FY27). Fleet retrofit programs remain on schedule,

supporting increased premium seating and customer experience

improvements.