American Airlines Group Inc. (AAL) is a major U.S. airline formed by the merger of AMR Corporation (parent company of American Airlines, founded in 1934) and US Airways in December 2013. This merger created the largest airline in the world. However, in recent years, the company has failed to beat analysts' estimates and investors have often abandoned it. What is the company's true situation and value?

American Airlines Group operates its main airline, American Airlines, and three regional subsidiaries, Envoy Air, Piedmont Airlines and PSA Airlines. These regional subsidiaries, along with three independent regional carriers, operate under the American Eagle brand. The company's principal activity is the provision of passenger and cargo transportation services.

This would be something to introduce the company. But for now, let's focus on the data that we have only recently obtained from the company. We're talking about the latest quarterly results. Earnings per share missed estimates by 26.61% and revenue missed analysts' estimates by 0.26%. The stock weakened 13.54% on the news and is still down today. Their value is now at last November's prices.

How the company is now faring in its complex business, which has been going through a huge test of resilience over the past few years, and how seasoned Wall Street analysts are now looking at the company is discussed in this analysis. We take a look at the hard data to uncover the company's true value and potential.

Management

Robert D. Isom - CEO

Robert Isom is the CEO of American Airlines Group and American Airlines, its principal subsidiary. He also serves on the airline's board of directors. Robert assumed the role of CEO in March 2022.

He previously served as American's President from 2016 to 2022. In that role, he oversaw the airline's business and operations. Prior to that, he served as American's executive vice president and chief operating officer after holding the same positions at US Airways. Prior to joining US Airways, Robert held senior financial, commercial, operational, strategic and international roles at GMAC, LLC, Northwest Airlines and America West Airlines.

Mr. Isom began his career at The Procter & Gamble Company. Robert is Chairman of Oneworld, Vice Chairman of Airlines for America and a member of the Board of Governors of the International Air Transport Association. He is also a member of the Airlink Board of Governors.

Robert holds a Bachelor of Science degree in Mechanical Engineering and a Bachelor of Arts degree in English from the University of Notre Dame, as well as a Master of Business Administration degree from the University of Michigan.

If you would like to learn more personal details about the EO himself, along with his entire work and academic history, you can check out his Linkedinwhere he is also regularly active.

Discipline/Specialization

Passenger Transportation: American Airlines operates flights to various destinations around the world. The company operates major hubs that provide connections within North America and between continents, providing a wide network of international and domestic flights

Cargo: The Company also provides cargo services that are integrated into its core business. This includes the transportation of various types of cargo, including time and temperature sensitive goods, which are critical for pharmaceutical and food products.

Regional air services: American Airlines Group operates three regional subsidiaries - Envoy Air, Piedmont Airlines and PSA Airlines. These companies, along with three independent carriers, operate under the American Eagle brand, providing regional flights throughout the United States

Fleet modernization and environmental responsibility: The company is committed to modernizing its fleet to improve fuel efficiency and reduce emissions. This includes investing in new, more efficient aircraft and implementing technologies that minimize the environmental impact

Membership of alliances: American Airlines is a member of the Oneworld global alliance, which enables it to work with other major airlines to provide passengers with a wider range of destinations and services.

Company profitability and cash

The company is still struggling to get higher on the stock market since the downturn in 2020. The price is down nearly 19% since the beginning of this year and doesn't look like it plans to turn around anytime soon. As a result, the company continues to struggle for investors and is attempting to return to now ancient share values.

The company's current market capitalization is $7.4 billion. This is really a very insignificant amount compared to how many planes and regular customers the company has. The stock is down 82% from its 2006 peak. If the price per share were to return to its peak, the company would be valued at at least 4.5 times its current value.

Only 1.47% of all shares ever issued are now privately held. This amounts to 9.38 million shares. The remaining 646.71 million shares are on the market among other investors. Today, 132,000 people work for the company and its debt is a high $40.06 billion.

In 2019, the company's revenue stood at $45.77 billion. But the operating margins were just above zero i.e. 3.68%. The net profit in that year was $1.69 billion. A year later, the entire airline industry came to a standstill thanks to anti-covid measures. Revenues fell to USD 17.3 billion and profit margin came down to -51.4%. The company made USD 8.89 billion for the year. In 2021, its business started to stabilize. Revenue was $29.88 billion and margins came in at -6.67%. The loss was $1.99 billion. In 2022, revenue continued to increase and reached $48.97 billion. The margins were 0.26% and so the profit was $27 million. Last year, revenue came in at $52.79 billion. Profit margins were 1.57%, bringing profits to $822 million.

The largest share of revenue comes from the country that generally has the most aircraft and flies the most, the United States. The share of revenues from this country is 71.31% of the 2023 total. Latin America is second with 13.8% followed by flights across the Atlantic with 12.79% of revenues. Flights across the Pacific then account for the remaining 2%.

In 2016, earnings per share were at $5.71. The company thus managed to beat analysts' estimates by just one cent. But in 2017, their value dropped to $4.88. However, this was above estimates by 0.81%. In 2018, the decline continued to $4.55. In 2019, there was an increase to $4.9 and it looked like the company was going to do better. But in 2020, that blow came and EPS fell to -$19.66. Even in 2021, they were below zero. Specifically, by $8.38. But in the last two years, we're finally seeing an increase. They were $0.5 in 2022 and $2.65 in 2023. They should continue to increase in subsequent years. By 2027, EPS could get as high as $4.32.

Revenues were at $40.18 billion in 2016. The next year it was $42.21 billion. In the next two years, they continued to increase in value. Revenue was $45.77 billion in 2019. During this time, only in 2018 did revenue fall short of market consensus, and that was by 0.3%. In 2020, there was a significant decline in revenue to $17.34 billion. However, over the last 3 years, the company has managed to "bounce back" and get revenue to $52.79 billion in 2023. Estimates were beaten by 0.11% last year. By 2027, sales are expected to reach a record $63 billion.

Going by the evolution of the various metrics we have now broken down above, we can safely say that the company has still managed to reach and even surpass its previous figures after the slump in 2020. So far, it looks like all of the company's services and businesses have been growing very well over the past 2 years. The only sector of the company is Cargo, which has dropped from $1.23 billion to $812 million from 2022 to 2023. The company's growth should continue in the coming years, but it should slow down significantly compared to recent years. In fact, in the last three years, the airline has only been making up for the losses it incurred in 2020. However, the debts it incurred with them will continue and will have to be actively addressed.