American Airlines Slashes Debt by 25%—Why Its Stock Could Soar 233%
American Airlines Group Inc. (AAL) has reduced its debt by nearly a quarter since 2021. The company’s total borrowings now stand at around $36 billion, down from roughly $46 billion. This reduction is part of a broader financial strategy to strengthen its balance sheet and improve profitability.
Analysts suggest the airline’s stock could see significant gains, with projections placing it around 233% higher than current levels based on future cash flow estimates.
The airline’s debt reduction efforts have been supported by major financial institutions. JPMorgan Chase, Barclays, and Bank of America acted as joint lead arrangers on recent capital markets deals. JPMorgan and Barclays took the lead in structuring these transactions, helping to improve AAL’s credit profile.
AAL’s strategy focuses on two key areas: attracting higher-paying passengers and improving operational margins. By premiumising its fleet and optimising routes, the company aims to boost cash flow. Even with modest revenue growth of just 1%, the airline expects to keep cutting debt.
The financial impact of these moves is already visible. AAL’s current valuation trades at a 29% discount compared to its peers, based on the EV/EBITDA multiple. However, analysts anticipate this gap will narrow as margins expand and free cash flow increases. The combination of debt reduction, better returns on capital, and stronger pricing power is expected to lift both earnings and the company’s valuation multiple.
Further debt cuts remain a priority. The airline believes a leaner capital structure will provide more flexibility for future investments and shareholder returns. With stronger cash generation, AAL plans to reinvest in its fleet and operations while maintaining its financial discipline.
AAL’s financial overhaul has positioned it for potential long-term growth. The airline’s stock now carries a 'Buy' rating, backed by expectations of higher cash flow and an expanding valuation multiple. If current strategies hold, the company’s debt levels and profitability could see further improvements in the coming years.
