American Airlines Stock Hits Two Year Low: What’s Going On?

American Airlines stock hit two year low. It’s down about a third this year. The market doesn’t seem to think their strategy is going to deliver results. Investors appear to be mirroring customer sentiment, judging from the comments and interactions I have with readers. It also appears to be mirroring employee sentiment, judging from what I hear from American’s front line.

The total value the market places on American Airlines right now is less than $16 billion. In contrast United’s market cap is $22 billion. Their stock has gone in the opposite direction from American’s this year. Southwest’s market cap is $34 billion and Delta’s is $35 billion.

American’s stock performance has been so bad it’s even spawned conspiracy theories. One analyst who tracks the stock told me earlier this year he thought Doug Parker could be tanking it on purpose, because while he’s compensated in stock he benefits more if it rises in the future.

The market clearly believes that American Airlines is on the wrong track. I’ve pointed out that,

American’s CEO Doug Parker bet an analyst that their stock would hit 60 next month. That’s looking unlikely.

Investors are buying their expected future flow of income generated by the company. American isn’t a growth company. They claim they’ll never lose money again but in an era of rising costs will they be able to generate enough revenue to offset?

Delta has a plan to grow. It isn’t the U.S. market. They have stakes in airlines like Virgin Atlantic, China Eastern, Gol, and Aeromexico. They’re betting on growth markets elsewhere in the world.

United may have had nowhere to go but up, but it’s not just the direction of the stock that changed United is now viewed as a substantially more valuable company. United.

American Airlines seems to wish they could run their operation without having to worry about customers when what they need is an intense focus on the customer, so that passengers prefer to fly American, choose American over competitors when schedule and price are similar, and even are willing to pay a premium to fly American the way people seem to be willing to pay more to fly Delta today.

To be sure American’s problems aren’t strictly limited to customers and revenue. Wall Street hasn’t been happy with higher capital expenses at American either — from new planes to an expensive to headquarters. American has argued that their competitors will need to buy new planes too, and indeed Delta doesn’t see the used market being as ripe as they once did.

What American really needs though is a clear strategy, a path to growth, a story about how they’re going to grow their revenue over time rather than simply spinning off profits within a normal range (“$3 billion to $7 billion a year”) which investors then need to discount based on risk.

It’s entirely possible that their stock has been overly beaten up, and that it will revert towards its mean. That doesn’t change that the airline isn’t a growth company, and if they want to deliver shareholder value they need to figure out how to profitably grow the business.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. […] When other CEOs were cutting their pay at the start of the pandemic in order to share sacrifice, American Airlines CEO Doug Parker’s pay wasn’t cut. He takes all of his pay in stock and told employees that the stock is worth less and that was his pay cut (as though he isn’t the one responsible for share price, which lagged before the pandemic). […]


  1. Meanwhile, Delta was just ranked #4 in employee happiness alongside companies like Facebook, Google and Netflix. Happy employees are themselves pleasant to be around and provide good service, and when you fly 2-4 segments per week, the happiness (or lack thereof) of the people you’re basically constantly around really starts to matter.

  2. If the stock keeps falling there may be hope that Parker finally gets canned. Investors have to know the 737 MAX is a bad deal for consumers.

  3. They’ll never lose money again……until an outbreak of virulent flu…..oh they have one already named Doug Parker.

    I only fly first and avoid AA unless its the best time/ price offering. That’s all I care about with them

  4. It’s about cash flow. One of the worst things to see in a capital intensive business is taking on large debt (Buying new planes) when there are genuine concerns about cash flow (AA’s has negative cash flow). Investors can look past many warts, but it is establish wisdom that cash flow is not one of them…cash flow kills companies.

  5. Two words: Doug Parker.

    On some level, I’ll admit he’s smart…after all, he wouldn’t have risen to his present position if he were dumb as a stump; the Peter Principle only goes so far. But I don’t think he’s smart enough to deliberately tank the stock because he *knows* that HE can make it go up….

  6. Gary as friendly advice, I would also just recommend that you disclaimer the hell out of any articles like this that you write. You are bordering on investment advice when you make statements like you think the stock will revert to its mean or other such comments. I’m not a lawyer, but you should check with one. I believe you subject yourself to licensing and reasonable basis standards which dictate you have done some work to support the statements you’ve made expressing an investment thesis and have been deemed capable of making such judgments by a sponsored firm. Otherwise, you need to be super careful to make sure it is your opinion. I would also advise not to trade any shares of the stocks you talk about in a 72 hour window either before publishing or after publishing and disclosing your holdings in the stocks you mention. This is a VERY sticky area.

  7. Sage advice from @Rob. We want you to be around for that little one and not a guest of the DOJ…

  8. American Airlines has turned into one Big Dumpster Fire. As a two million miler, I avoid AA like the plague.

  9. Interesting piece but I’d argue that a good proof read would greatly help your credibility.

  10. I think Gary is well within the limits of the blog. He is not giving any investment advice but is simply stating the obvious facts and impressions from a perspective of a frequent traveler/travel blogger. He is also not giving any projections for the AAL stock price(i.e., “It’s entirely possible that their stock has been overly beaten up,..”) nor he is disclosing any new confidential info.
    His main point is that that the “new” American lacks a clear business strategy. From operational performance to customer satisfaction and employee relationship AA is not in a better shape than when Horton was at the helm. Of course, this is my personal opinion and should not be taken as an investment advise.

  11. To be clear, and for full disclosure, I do not hold any position in any publicly traded company stock. All of my investments in publicly held companies are through broad-based low cost mutual funds or ETFs. I have made no trades of any kind in the past month, other than automatically-executing trades to purchase mutual fund shares as a result of payroll 401(k) contributions. I am also not an ‘insider’ of any public company, nor do I have any financial relationships (other than as a customer) with American Airlines or any of its airline competitors.

    I am quite certain of the ground I’m treading in sharing my opinion here.

  12. Airline stock pricing is largely irrational in the short to medium term. It can fluctuate wildly, as AA’s shares first rose 20% and now have fallen 25% — all in about the last month, on zero news! Investing in these mercurial stocks is a dangerous game to play and I highly recommend that 99%+ of folks not play that game.

    But one GUARANTEED way to lose money investing in airline stocks is too buy or sell them based on frequent flyer satisfaction with an airline. In fact, there’s been a recent scholarly article noting ZERO correlation between airline customer satisfaction and airline profitability. Often, the best airlines to fly are the ones that have unprofitable business models, while the worst ones are the most profitable. It actually makes sense if you think about it.

  13. What’s going on? Simple answer: Doug Parker making his mark

    And USdbaAA has a mission statement (abeit not advertised): we will be the world’s largest ULCC

  14. I think everyone may be underestatimating the genious of AA’s mgmnt team. The strategy seems to be to drive the value of the company so low that it becomes an attractive take over target for a much better airline like Southwest or Alaska. Then they can cash in on their stock packages with a huge windfall.
    If you want to understand a company’s strategy, you only have to look at what are the incentives of the executives. They will always be acting in their best interests.

  15. Nice article and directionally correct, but in needs of some Economics 101: market capitalization is the wrong measure to compare companies by; you need to use their enterprise value. See
    You can find the enterprise value calculated for you on Yahoo! Finance among other places, e.g.

    Here’s how U.S. airlines stack up using the the correct enterprise value metric:
    * DAL = $45b
    * AAL = $36b
    * LUV = $35b
    * UAL = $32b
    * ALK = $8.9b
    * JBLU = $6.1b
    * SAVE = $4.0b

  16. @chopsticks – you don’t help your case citing Christopher Elliott. Of course customers can be happy with an airline giving away the store. But the airlines the market values the most are also the ones customers prefer. Southwest in particular is notable for its earnings multiple.

  17. Wonder if it has to do with their eroding service, comfort, reliability, wage giveaways and frequent flier devaluations?

  18. @Jake – enterprise value is certainly more appropriate to determine the cost to acquire a company. you’d need to acquire its stock and assume its debt. i’m not sure that’s super-relevant to determining why share prices have fallen, and the total value of a company *to its common stockholders*.

  19. @Gary — Yes, but it’s not Elliott’s research. It’s Jeffrey Wong’s research at the University of Nevada. Now Wong could be wrong (it wouldn’t be the first dubious academic study about the airline industry), but he’s not. The fact is that being nice to your customers doesn’t make an airline money. What does make an airline money is getting them to pay more than the cost of their transportation. It’s why legacy airlines make their money on lie-flat business class seats which, objectively, are over-priced. And why an airline like Spirit makes almost half of their money on largely-unnecessary “ancillary” purchases by customers.

    We would all like to live in a world where companies were rewarded for delivering better service. Sadly, that’s not the airline industry. The airlines that score the highest in customer service are usually at the bottom of profitability (except for airlines with absolutely horrific business models, like Norwegian).

    The best example of not correlating service to profitability is UA. Doug Parker’s right-hand man Scott Kirby effectively took over management of UA and applied all of the customer service “tricks” he learned at AA. None of them have been consumer friendly, and UA is now perhaps the most customer-unfriendly airline of the “big three” (like no free carry-on with basic economy). Yet, UA has been, by far, the best investment in the airline industry this year. And this despite suffering from particularly egregious (and accidental) incidents like killing pets and having the police assault David Dao.

    As I say, airline investing is a very tough game. But picking winners and losers by how well they treat their frequent flyers is just a horrific investment thesis.

  20. What did dougie expect? Hes done nothing but screw over his customers at literally every turn. Whether it’s destroying the catering, the incessant devaluations of AAdvantage, ripping out PTVs … the list goes on and on. Be gone, dougie! Go work for ryanair!

  21. @chopsticks ” What does make an airline money is getting them to pay more than the cost of their transportation.” The relevant question though is how you do this. Alaska [Virgin America acquisition challenges notwithstanding] and Delta do it fairly well. Delta makes a case that they earn a revenue premium by delivering what customers want most. They offer reliability, a marginally better inflight experience, and friendlier staff — and customers are willing to pay more than industry average to fly them as a result. Southwest earns a huge earnings multiple as a result of loyal flyers and continued growth opportunities (they’ve barely exploited anything beyond the domestic market).

    As for United, they were overly beaten up and had been so damaged during the Smisek era that it hasn’t taken much to improve their prospects. They’re doing more profitable domestic flying out of small markets with less competition from ultra low cost carriers.

    I’m not suggesting anyone pick out future price moves on the basis of shifts in consumer sentiment. I’d stay away from airline investing generally. There’s too much outside of the control of each business. It’s capital intensive, heavily-unionized, and as soon as a plane pushes back their whole investment is in the hands of government air traffic control.

    What I am saying is that decimating your premium product, and taking the customer out of the focus on the business, doesn’t seem to correlate with achieving a higher multiple…

  22. Mission statement? Oh please! Their mission is to transport passengers from point A to point B. No mission statement has ever amounted to more than marketing fluff or smug exec self righteousness. Employees could give two shits about mission statements.

  23. I’m spending tens of thousands for myself family ,employees and anyone that will listen to me to move their business elsewhere on solid recommendations
    American sank lower in customer respect than any airline in history with regard to customer service ,award redemption at saver levels and non responsive customer relations when things go wrong.For 20 years they had my entire wallet and would get 98% of my revenue for air bookings
    In 2018 they got two 75 dollar bookings from me this year
    I would love to be their customer again but Parker is destroying the company one day at a time and that’s a shame.With a third less greed and contempt for his customers he could have had it all for the most part.He blew the opportunity of a lifetime to have a membership base that would rarely switch loyalties
    He might apprentice at Alaska to see what great customer service is
    I have to pinch myself they handle my business so well and appreciatively.
    They have bent over backwards as an elite member.
    I was so abused by some American agents I don’t feel worthy of such great customer service now!I have to fly a little jet Blue and Southwest where Alaska doesn’t cover my needs but well worth the effort and I love Mint!If they go to Europe as they discuss they would demolish AA to some degree
    I never thought I could leave AA but the chains are off & free now and its some of the happiest travel years of my lifetime.No more problems and bad attitudes rarely ever!!!

  24. First, the armchair stock analysis is appreciated, and given the forum, does not come close to being regulated. Even Doug Parker projected a stock price, and he is subject to free speech restrictions. So, keep on describing the painting as you see it.
    Second, if analyzing historical stock charts, I would use USAir, not AAL.
    3rd, if customer service or satisfaction were the chief metric for determining stock price or market cap, where would Walmart, Chase Bank, the telephone company (any of them), your insurance company, etc be in terms of perceived market value vs. Actual market value?

  25. Mission statement?!


    When a corporation trumpets a mission statement, it’s their way of saying “no better ideas”.

  26. After AA eviscerated its AAdvantage program and alienated its frequent flyers, it’s little wonder that the resulting loss is reflected in its share price. Three years ago, I flew over 125,000 miles on AA and enjoyed my exec platinum status. This year, it’s been about 600 miles. I now go strictly according to price, and no more miles runs either.

  27. Referencing Lawrence B Abramson statement: “After AA eviscerated its AAdvantage program”;

    For me, Executive Platinum for a number of years until the end of 2017. My flying on AA in 2018: 0 miles, 0 Segments, and $0 dollars spent. :)-

    Oh, yea, and I flew about 100,000 miles on other airlines!

  28. “Gary Leff says: @Jake – enterprise value is certainly more appropriate to determine the cost to acquire a company. you’d need to acquire its stock and assume its debt. i’m not sure that’s super-relevant to determining why share prices have fallen, and the total value of a company *to its common stockholders*.”

    Jake is right. Let’s say you buy a million dollar house, but you have an $800k mortgage. Your equity in the house is $200k. You wouldn’t say the house is worth $200k. Stocks are valuing the equity of the company. EV is the correct way to value Airline companies.

  29. @Rob we’re talking about why is the stock down, and one of the reasons frequently mentioned is capital expenditures, @Jake’s analysis doesn’t refute that. Moreover treating debt as equivalent to value is a mistake, otherwise it wouldn’t matter price paid for planes and Delta would have gone all-in on the new jet market years ago. As others have observed, cashflow matters here. Remember that when you buy a million dollar home with $800k in debt, and the value of real estate falls 30%, the home is no longer worth a million dollars just because $200k down payment + $800 mortgage = $1 million.

  30. In any case none of this changes that the stock is down dramatically even as the company aggressively buys back shares — such that if its equity value were to remain constant shares should rise from that alone (reducing the denominator).

  31. Not to applaud the airline – after decades of AA being ‘my’ airline (for domestic flights, with status) I nowadays feel like I’m being DP’ed every time I do business with them – but I missed any discussion above of how the airline is doing in its daily business. Which I surmise is “as good as most of the competition.” So they’re not missing my butt in one of their seats when I choose someone else, and I’m getting a chance to find out that many of the others are even worse, while ruing standing in long lines on carriers where I lack status.

  32. Gary again with the berating of AA. What is the deal with you and AA? Honestly why do you hate on them? That is an honest question!

  33. Back when AAL was trading around $55 I bought Jan 2020 put options with a strike price of $55. I think Doug Parker is doing a swell job! 🙂 🙂

  34. When someone asked Richard Branson how to become a millionaire, he famously stated, “Start out a billionaire, then buy an airline”.

  35. “What I am saying is that decimating your premium product, and taking the customer out of the focus on the business, doesn’t seem to correlate with achieving a higher multiple…”

    @ Gary — But they’re NOT decimating their premium product. Even you say their int’l biz class service is good. What isn’t so good is when you buy a Basic Economy ticket and sit in unassigned middle seat in the back. But isn’t that kind of the point? The “problem” in recent years is that there wasn’t enough discomfort in steerage to justify the outrageous additional cost of premium cabin service. But guess what: premium cabin service is now getting better, while steerage gets worse. And what is happening? You linked Scott McCarthney’s piece: more employers are letting their road warriors upgrade. Ka-ching baby! Isn’t that EXACTLY what the airlines want. And are they being stupid for encouraging this trend?

  36. @chopsticks here I am referring to their domestic first class product where they are taking away ~ 2-4 inches of legroom and installing less comfortable seats. [They’re also taking away legroom from their upsell ‘Main Cabin Extra’ product as well.]

  37. @Gary — I think the calculation is that the extra legroom doesn’t sell the product, and that it’s more profitable to sell that space (by adding seats to the aircraft). Are they wrong? Any data to show that?

  38. @chopsticks – American has suggested otherwise in investor presentations, that the extra space is core to their revenue-enhancing segmentation strategy.

  39. @Gary, I understand what you mean in your comments, but Jake was taking issue with what you wrote in your post and he is correct, because this statement you make in your post is not correct.
    “The total value the market places on American Airlines right now is less than $16 billion. In contrast United’s market cap is $22 billion.”

    The total value the market places on American Airlines is NOT $16 billion. If it were, its stock would be much lower. Your statement is misleading because it implies UAL is more highly valued, when in fact, the opposite is true.

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