American Airlines Group Inc. (NASDAQ:AAL) experienced a decline in its stock price on Tuesday following the publication of its financial results for the fourth quarter and full year ending 2025. The airline showcased notable revenue milestones during the period despite encountering several operational challenges, including disruptions linked to a government shutdown late in the year and a significant winter storm event.
In the fourth quarter, American Airlines recorded a record-high total operating revenue of $13.999 billion. This represented an increase of 2.5% compared to the $13.663 billion reported in the same period a year earlier. For the entire year, total operating revenue reached $54.633 billion, which was 0.8% higher than the $54.173 billion generated in 2024. The company noted that the government shutdown adversely influenced fourth-quarter revenue by an estimated $325 million, underscoring the impact of external factors on its financial results.
Despite the revenue growth, the airline missed analyst expectations on earnings and revenue. Adjusted earnings per diluted share for the fourth quarter stood at 16 cents, falling short of the 34-cent consensus estimate. Additionally, the total operating revenue of $13.999 billion did not meet the anticipated $14.028 billion figure. Operating margins for the quarter declined to 3.2%, down from 8.3% a year earlier. This contraction reflected increased costs and operational disturbances experienced during the period.
From an operational perspective, fourth-quarter revenue passenger miles grew 1.5% year-over-year, reaching 61.596 billion. Also, available seat miles rose 4.2% to 74.472 billion. However, the passenger load factor decreased to 82.7% from 84.9% in the prior year, signaling slightly weaker capacity utilization. Passenger revenue per available seat mile fell by 2.0%, and total revenue per available seat mile declined 1.6%. Meanwhile, fuel expenses increased, with the average price of aircraft fuel, including associated taxes, rising to $2.42 per gallon from $2.34 during the previous year.
Segment analysis of international revenue revealed positive trends with domestic passenger revenue growing 1.5% to $9.191 billion. Atlantic route revenue increased 7.5% to $1.423 billion, and Pacific passenger revenue grew 8.3% to $395 million. Latin America passenger revenue, however, declined 0.9% to $1.648 billion. Overall, total international passenger revenue increased 3.5% year-over-year to $3.466 billion.
On the balance sheet and cash flow front, the company generated net cash from operating activities of $3.099 billion in 2025, down from $3.983 billion the previous year. Free cash flow finished negative at $(83) million for the year. At year-end, American Airlines held $954 million in cash and maintained a total available liquidity position of $9.2 billion. Debt reduction efforts led to a total debt figure of $36.509 billion, marking a year-over-year decrease of $2.1 billion.
During the earnings call, senior management conveyed an overall positive outlook for the company’s long-term strategic plans, with emphasis on expansion in premium travel offerings and fleet modernization. The Chief Financial Officer expressed expectations for strong improvements in the main cabin segment throughout 2026, contingent upon stable macroeconomic conditions. Growth in premium seating is forecasted to surpass non-premium classes for the remainder of the decade. The Chief Executive Officer highlighted initiatives to increase lie-flat seat capacity by over 50% by 2030 as part of a broader realignment toward higher-margin fare classes.
However, management did not overlook short-term operational adversities. The airline has faced significant challenges from Winter Storm Fern, described as the most substantial weather-related disruption in the company’s history, resulting in more than 9,000 flight cancellations. The storm is projected to reduce revenue by between $150 million and $200 million. Additionally, government-related travel experienced a roughly 50% decline in traffic during the fourth quarter due to the government shutdown. The company remains focused on restoring and growing its indirect sales distribution channels and intends to ramp up international fleet and premium seating through new aircraft deliveries and retrofit programs from 2026 onwards.
Looking ahead, American Airlines issued guidance for full-year 2026 adjusted earnings per diluted share in a range of $1.70 to $2.70. This range encompasses the analyst consensus estimate of $1.97 per share. The company anticipates free cash flow exceeding $2 billion for the year. For the first quarter of 2026, the outlook anticipates an adjusted loss per diluted share between 10 cents and 50 cents, versus the consensus loss estimate of 30 cents, reflecting ongoing disruption from Winter Storm Fern and broad operational challenges.
Shares of American Airlines Group traded down 2.92% at $14.14 on Tuesday, reflecting investor caution despite record revenues, as concerns around margin pressure and operational headwinds continue to weigh.