Like any other airline in the industry, American Airlines (AAL) moves thousands of passengers daily to various national and international destinations. AAL’s operations can be divided into mainline and regional services and cargo services. It also generates strong cash generation from its “other” category. Let’s take a brief look at these categories.
Mainline and regional services
American Airlines’ mainline and regional services are both passenger services. They differ in terms of individual enplanements and total distance traveled. The airline has larger planes instilled on its mainline flights, which means utilization is much lower than its regional segment. However, mainline flights generate a profit per seat mile, which is about 70% more than regional flights.
Overall, the mainline revenue segment contributes more than 70% of AAL’s total operating revenues. As you can see in the above graph, in the latest quarter, AAL’s mainline segment accounted for 69% of revenues, despite a 6% year-over-year decline.
Like United Continental (UAL), American Airlines has a dedicated and successful cargo service. Although it might not match FedEx (FDX) or United Parcel Service (UPS) in terms of volume, it still makes a significant contribution to AAL’s revenues. The segment has low costs since it doesn’t require meal services or flight attendants.
Miscellaneous and other
American Airlines’ “other” segment contributed 12% to total revenues, making it AAL’s third most profitable segment. This segment primarily deals with ancillary revenues and the much-used loyalty program.
American Airlines forms 3.9% of the PowerShares Dynamic Leisure & Entertainment ETF (PEJ).
In the next article, we’ll look at AAL’s geographic mix of revenues.