American Airlines Group (AAL): 2Q beat; capacity concerns and higher fuel weigh on stock

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American Airlines Group (AAL): 2Q beat; capacity concerns and higher fuel weigh on stock

Goldman Sachs American Airlines Group (AAL)

n Premium growth: During the quarter, premium passenger unit revenue (“PRASM”)

increased 13.4% year-over-year outpacing main cabin PRASM growth of 8.8%

supported by strength in both corporate and premium leisure demand. Lie-flat and

premium economy capacity grew nearly twice as fast as main cabin capacity, while

premium revenue continued to outperform across the network. Management

highlighted that premium now accounts for ~50% of ticket revenue while

representing only ~30% of seats. Looking ahead, American expects premium seat

growth to exceed non-premium growth, with premium seats expected to increase

~5% vs. ~3% for non-premium seats in FY 2026. Premium seat growth is driven by a

higher proportion of premium seats on deliveries of new Boeing 787-9s and Airbus

A321XLRs in addition to domestic retrofit programs for A319 and A320 aircraft and

777 retrofits in the international network.

n FCF/CAPEX: American expects to generate positive free cash flow at the midpoint of

its 2026 earnings outlook, despite a significantly higher fuel cost environment. This

assumes just under $4 billion in CAPEX, driven by new aircraft deliveries and the

aforementioned retrofits. Looking forward, the company expects 2027 CAPEX to

step up to $4.5 billion as aircraft deliveries ramp. Management did not provide an

update on 2028/2029 CAPEX as the delivery schedule likely needs to be reshaped as

delays in prior years have created some lumpiness in deliveries over this period.

n Medium-term capacity/CASM-ex outlook: Management reiterated that its current

fleet plan supports mid-single-digit capacity growth, with growth each year