American Airlines: A High-Debt, High-Potential Play in a Restructuring Industry

American Airlines finds itself at a crossroads in 2025, balancing the promise of catalyst-driven growth with the weight of structural risks. The carrier's $36.8 billion in total debt and $29.9 billion in net debt as of Q3 2025 according to financial reports underscore its precarious financial position, yet its aggressive investments in co-branded credit cards and premium service upgrades suggest a bold strategy to reclaim market share. This analysis evaluates whether American can leverage these growth drivers to offset its debt burden and labor tensions, which threaten to derail its progress.

The Debt Burden and Refinancing Efforts

American's debt load remains a critical vulnerability. Despite a net debt reduction from $29 billion in Q2 to $29.9 billion in Q3 2025 as reported, the airline's interest expenses-$433 million in Q3 alone according to financial data-highlight the ongoing drag on profitability. The company has set a target to reduce total debt below $35 billion by 2027 according to management, a goal that hinges on disciplined cost management and sustained revenue growth. S&P Global's recent 'A+ (sf)' rating for American's Series 2025-1 Class A debt signals confidence in its refinancing strategy, but the airline's operating margin of 1.1% in Q3 2025-trailing Delta's 10.1% and United's 9.2%-reveals the fragility of its financial model.

Catalysts: Co-Branded Cards and Premium Upgrades

American's co-branded credit card program has emerged as a bright spot. Spending on these cards rose 9% year-over-year in Q3 2025, with Citi and Mastercard's renewed partnership expected to amplify this growth. The launch of the Citi® / AAdvantage® Globe™ Mastercard in October 2025 offering 90,000 bonus miles, with CEO Robert Isom emphasizing that co-branded card and loyalty program remuneration could reach $10 billion annually, underscores the airline's focus on monetizing loyalty.

Simultaneously, American's premium service investments aim to attract high-yield travelers. The rollout of Flagship Business Suites on Boeing 787-9s and Airbus A321XLRs, featuring lie-flat seats and luxury amenities, is part of a broader "customer reimagination" strategy as revealed in a recent announcement. The airline plans to add 30% more premium seats in its domestic fleet and 50% more on long-haul aircraft by 2030 according to strategic planning documents, targeting a segment where Delta and United have historically outperformed. While these upgrades have yet to translate into profitability in Q3 2025 as reported, analysts project revenue benefits to materialize in 2026.

Structural Risks: Labor Tensions and Strategic Gaps

Despite these growth initiatives, American faces mounting labor risks. Six major unions-representing pilots, flight attendants, and ground workers-have united in demanding better pay and working conditions. The most pressing issue is the stalled contract with the Association of Professional Flight Attendants (APFA), which rejected a 17% wage increase as inadequate. With flight attendants having gone without raises for over five years, the threat of a strike looms large. A potential strike could slash revenue by 23%, a catastrophic blow for an airline already struggling with unprofitable operations in Q3 2025 as noted in industry analysis.

Moreover, American's underinvestment in premium services compared to rivals remains a strategic weakness. While Delta and United have maintained cost discipline and expanded premium cabins according to industry reports, American's focus on capacity adjustments has left it vulnerable to fare declines as analysts have warned. Unions and analysts alike argue that the airline must prioritize premium experiences over cost-cutting to compete effectively as stated in recent labor discussions.

Balancing the Equation

American's path forward depends on its ability to execute dual strategies: deleveraging its balance sheet while scaling high-margin revenue streams. The co-branded card program and premium upgrades offer a compelling value proposition, but their success hinges on resolving labor disputes and accelerating fleet modernization. A strike or prolonged contract impasse would not only disrupt operations but also divert capital from growth initiatives. Conversely, a breakthrough in negotiations could stabilize costs and free up resources for further premium investments.

For investors, the key question is whether American can transform its catalysts into sustainable profitability. The airline's debt reduction targets and credit rating upgrades provide a floor, but the ceiling is dictated by its ability to close the gap with Delta and United. With 2026 poised to be a critical year for premium revenue realization, the coming months will test American's resolve to balance ambition with pragmatism.