How AAL (American Airlines Group) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a major airline like AAL Income Statement Overview makes money is essential for investors and anyone interested in the business of commercial aviation. In this post, we break down AAL's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick AAL Overview

AAL operates as a leading U.S. airline, providing scheduled air transportation for passengers and cargo across domestic and international routes. Revenue comes primarily from ticket sales, ancillary passenger services, and other aviation-related products. The business is structured around core passenger operations, with additional contributions from cargo and other services, though in Q3 2025, all revenue is reported under "Other Revenue by Product" due to segment reporting changes.

Revenue Breakdown

• Total Revenue (Q3 2025): $13.7B (+0.3% YoY)
  • Other Revenue by Product: $13.7B (100% of total, +1,384.9% YoY)
  • Cargo Revenue: $0.0B 0%
  • Passenger Revenue: $0.0B 0%
  • Growth is powered by resilient travel demand and strategic pricing, despite segment reclassification.

Gross Profit and Margins

• Gross Profit: $3.76B (27.4% gross margin)
  • Cost of Revenue: $9.94B (down 8.6% YoY)
  • AAL maintains moderate margins due to operational scale and ongoing cost controls, even as fuel and labor costs remain significant.
• Most costs come from fuel, labor, aircraft maintenance, and airport fees.

Operating Income and Expenses

• Operating Income: $151M (+69.7% YoY, 1.1% margin)
• Operating Expenses: $3.60B (+34.0% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: $483M (+3.2% YoY, 3.5% of revenue) — covers sales, marketing, and administrative functions
  • AAL continues to control costs while investing in operational reliability and customer experience.

Net Income

• Pre-Tax Income: $142M (down 44.5% YoY, 1.0% margin)
• Income Tax: Not disclosed for Q3 2025
• Net Income: $114M (down 23.5% YoY, 0.8% net margin)
• AAL converts a modest portion of sales into profit, reflecting the capital-intensive and competitive nature of the airline industry.

What Drives AAL's Money Machine?

• Passenger operations: Historically over 90% of revenue, but in Q3 2025, all revenue is reported under "Other Revenue by Product" due to segment reporting changes.
• Load factor and yield: Key metrics include passenger load factor (seat occupancy) and yield (revenue per passenger mile), both supported by strong demand and disciplined capacity management.
• Fleet modernization: Strategic investments in newer, fuel-efficient aircraft reduce long-term operating costs.
• Ancillary services: Growth in baggage fees, seat selection, and loyalty programs, though not separately disclosed in Q3 2025.

Visualizing AAL's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially fuel and labor) taking the largest chunk.
• Even after significant costs, just 0.8% of revenue drops to the bottom line.

Key Takeaways

• AAL's money comes overwhelmingly from core airline operations (passenger and related services)
• Moderate gross and slim net margins illustrate the capital intensity and fierce competition in aviation
• Heavy investment in operational efficiency, balanced by strict cost controls
• Ongoing growth is driven by travel demand recovery and ancillary revenue streams

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FAQ About AAL's Income Statement

1. What is the main source of AAL's revenue in 2025?

AAL generates 100% of its reported revenue in Q3 2025 from "Other Revenue by Product," reflecting a change in segment reporting. Historically, over 90% of revenue comes from passenger operations, with the remainder from cargo and ancillary services.

2. How profitable is AAL in Q3 2025?

AAL reported net income of $114M in Q3 2025, with a net margin of approximately 0.8%, reflecting modest profitability driven by cost controls and stable demand, but pressured by high operating costs.

3. What are the largest expense categories for AAL?

The biggest expenses on AAL's income statement are cost of revenue (primarily fuel, labor, and aircraft maintenance) and operating expenses, particularly Sales, General & Administrative (SG&A) costs, which reached $483M in Q3 2025 (3.5% of revenue).

4. Why does [segment/division] operate at a loss?

Segments such as international or new route expansions may operate at a loss due to high upfront costs and competitive pricing, as AAL invests in market share and long-term growth—even if the division is unprofitable today.

5. How does AAL's effective tax rate compare to previous years?

AAL's effective tax rate for Q3 2025 is not disclosed, but in prior periods, rates have fluctuated due to tax benefits from net operating losses and international structuring. Investors should monitor future filings for updated tax rate disclosures.