On January 22, 2025, American Airlines (AAL) shares closed at $18.66, marking a new high for the year. After years of struggling to keep pace with competitors like United Airlines and Delta Air Lines, American Airlines seemed to be on the path to recovery. The stock had been climbing steadily throughout late 2024, and the airline projected strong financial growth for 2025.
However, the company’s outlook quickly changed. Starting January 23, AAL shares began a steep decline. Even before the February 2025 trade war initiated by former President Donald Trump sent shockwaves through the stock market, American Airlines was already experiencing losses. Over the next six weeks, the stock continued its downward spiral. By March 13, shares had hit a six-month low of $10.67—a staggering 42% drop from its January peak. As economic uncertainty looms, American Airlines faces an uphill battle in regaining investor confidence.
American Airlines Underperforms the Market and Competitors
Between January 22 and March 13, the S&P 500 fell roughly 9%, erasing gains made post-election following Trump’s victory over Kamala Harris. The broader commercial aviation industry also suffered, with airline stocks declining by an average of 28%, according to Yahoo Finance. However, American Airlines fared worse than its peers.
- Delta Air Lines (DAL): Down approximately 37%
- United Airlines (UAL): Declined around 35%
- American Airlines (AAL): Fell over 42%
While legacy carriers have been hit hardest by the latest stock sell-off, American Airlines has struggled more than its competitors. The company’s financial struggles, weaker positions in key markets, and a Sun Belt-heavy route network lacking critical business hubs have contributed to its poor performance.
Why Legacy Airlines Are Struggling Amid Economic Unrest
Legacy carriers like American Airlines, Delta, and United rely heavily on business travelers who frequently book premium seats. However, the ongoing trade war and growing recession fears are leading corporations to cut back on travel expenses. When businesses tighten budgets, corporate travel—which is crucial for airlines’ profitability—declines significantly.
A weak economy also means fewer business engagements, fewer deals, and fewer reasons for frequent corporate travel. This spells trouble for airlines that depend on high-spending passengers to fill their premium cabins.
Leisure Travel Faces Challenges Too
While business travel is crucial, leisure travel is also at risk. Economic uncertainty typically leads to a decline in vacation spending, as consumers view travel as a luxury rather than a necessity. Even those willing to travel are more cost-conscious, opting for budget airlines like Frontier Airlines over full-service carriers like American.
Adding to these woes is the devaluation of the US dollar. With investors shifting capital to European markets, currencies like the Euro and the British Pound have strengthened against the dollar. This makes European vacations more expensive for Americans, potentially reducing demand for transatlantic flights—one of the most profitable segments for major US airlines.
Why American Airlines Was Hit Harder Than Its Competitors
American Airlines’ decline began earlier than Delta’s and United’s, signaling deeper structural challenges. The airline has a weaker presence in key business hubs and faces intense competition on international routes. While the entire industry is under pressure, AAL’s unique vulnerabilities have made it more susceptible to market turbulence.
Despite these struggles, some investors remain hopeful. Notable analyst Jim Cramer has expressed optimism about American Airlines’ long-term growth potential, suggesting that industry confidence in the company has not been completely lost. Additionally, American Airlines’ lower exposure to European markets may help insulate it from the worst effects of the dollar’s decline.
Can American Airlines Rebound?
The airline industry is notoriously cyclical, and while American Airlines is facing significant headwinds, there is potential for recovery. The company will need to reassure investors by demonstrating financial stability, adapting to economic challenges, and capitalizing on any rebound in travel demand. As geopolitical tensions and market conditions evolve, American Airlines must navigate uncertainty strategically to regain investor confidence.
