American Airlines Doubles Down on Premium Flyers to Fix Profit Woes

American Airlines is making a hard pivot to focus on premium customers after a mixed earnings report revealed record annual revenue but a steep drop in quarterly profit. The strategy banks on higher-paying passengers to solve the airline's thin margins.

• Premium pays the bills: The pivot follows the money. Revenue from American's premium offerings outpaced its main cabin by seven percentage points in the fourth quarter, a detail first reported by Reuters. The airline now plans to rip out main cabin seats to make room for more premium offerings, with CFO Devin May stating, "we expect our premium seat growth will outpace our non-premium offering each year for the remainder of the decade.”

• AAdvantage as the gatekeeper: Powering the strategy is its AAdvantage loyalty program, which saw a record number of new enrollments last year, giving American a large, captive audience for its premium push. The airline is creating a clearer divide between its customer tiers, having recently stopped awarding loyalty points for basic economy tickets, effectively nudging flyers toward more expensive fares.

American is betting that coddling its best customers will create a more resilient and profitable business, even if it means alienating budget-conscious flyers and making the travel experience more stratified. The move is part of a broader industry trend to widen the gap between the front and back of the plane, with American recently cutting loyalty point eligibility for basic economy fares. The strategy also relies heavily on the return of high-value corporate travelers to drive revenue.