Key Takeaways
- Jefferies upgraded AAL’s price objective from $12 to $13 while maintaining a Hold recommendation
- First-quarter unit revenue climbed 7.6%, with second-quarter projections at 9.5%–10.5% expansion
- The carrier is issuing $1.14 billion in aircraft-secured bonds covering 32 jets
- Rising fuel expenses are impacting margins, with management signaling potential 2026 losses
- BMO Capital lifted its forecast to $13.50; Evercore maintains $14.00 projection
American Airlines delivered a first-quarter loss of $0.40 per share, surpassing Wall Street’s consensus estimate of a $0.47 deficit. Total revenue reached $13.91 billion, exceeding analyst projections of $13.79 billion.
American Airlines Group Inc., AAL
The carrier reported a 7.6% increase in unit revenue during the January-March period. Management projects second-quarter unit revenue expansion between 9.5% and 10.5%.
Following the quarterly report, Jefferies analyst Sheila Kahyaoglu increased her price objective on AAL from $12 to $13 while retaining a Hold stance on the shares.
Shares are currently changing hands near $12.10, representing a discount to InvestingPro’s Fair Value calculation of $14.05. This differential points to potential undervaluation at present trading levels.
Jefferies established an annual EPS projection of $0.10, falling within the company’s broad guidance corridor of -$0.40 to +$1.10. The research firm highlighted opportunities for improved margin execution under favorable operating conditions.
BMO Capital similarly increased its target, advancing from $12.00 to $13.50. BMO emphasized an improving yield environment and cited the first-quarter performance as exceeding market expectations.
Raymond James maintained its Market Perform designation, recognizing advancement in narrowing the margin differential with traditional competitors. Evercore ISI preserved its In Line assessment with a $14.00 valuation target.
Aircraft-Backed Debt Offering Unveiled
On Monday, American Airlines introduced a $1.14 billion bond issuance to fund 32 aircraft spanning both new deliveries and current fleet assets. The transaction employs enhanced equipment trust certificates, commonly known as EETCs.
The primary tranche consists of $905 million with a weighted average maturity of 7.7 years. Initial pricing discussions center around a 5.625% yield.
EETC structures enable non-investment-grade airlines to tap investment-grade financing channels by pledging aircraft as security. While S&P assigns AAL a B+ corporate rating—four levels below investment grade—the senior bond classes are anticipated to receive an A rating from S&P.
Goldman Sachs, MUFG, and Morgan Stanley are serving as lead underwriters for the debt transaction.
Petroleum Expenses Present Ongoing Challenge
Escalating oil prices continue to compress profit margins throughout the aviation sector. For American, jet fuel represents one of the largest operating expense categories.
The previous week, the company reduced its full-year profit guidance. Management cautioned that the carrier might report a 2026 annual loss after absorbing approximately $4 billion in incremental fuel expenditures.
American additionally deferred $300 million in aircraft delivery capital spending from 2026, creating enhanced financial flexibility.
The airline intends to expand capacity roughly 4% this year, approximately double the industry-wide growth rate. Jefferies noted that given current macroeconomic conditions, further moderation of that capacity expansion target may prove necessary.
According to InvestingPro intelligence, ten analysts have reduced earnings forecasts for the coming period.
AAL shares declined approximately 2.4% on Monday as investors digested the bond offering announcement and quarterly results.
