Airline executives have spent much of the past two years talking about resilient travel demand and record revenues, leaving many travelers with the impression that airfares have become permanently more expensive. American Airlines Group, Inc. (NASDAQ:AAL) sees it differently.

Speaking at the earnings call after reporting second-quarter results, CEO Robert Isom commented about inflation-adjusted airfares.

“Real airfares are still lower than in 2019,” he said, even as demand continues to strengthen across domestic and international markets. That apparent contradiction helps explain one of the biggest shifts taking place across the airline industry: airlines are increasingly earning more from who is flying rather than simply how much everyone pays for a ticket.

Premium Travelers are Helping American Fly

American’s earnings highlighted just how much its business has shifted toward premium travelers.

“So it’s nearly half of our ticketed revenue on roughly 30% of our seats. And the thing we’re really excited about is nearly 60% of our revenue comes from households making $150,000 or more,” Nathaniel Pieper, Chief Commercial Officer chimed in.

The customer mix tells a similar story. According to the company, nearly 60% of ticket revenue now comes from households earning more than $150,000 annually, a customer base management believes is likely to remain resilient even during periods of economic uncertainty.

To capitalize on that trend, American is expanding premium seating faster than economy seating through new aircraft deliveries and cabin retrofit programs while investing in lounges, upgraded onboard products and, beginning in 2027, Starlink high-speed Wi-Fi.

Strategy at Work

The strategy appears to be working. Premium unit revenue increased more than 13% year over year, outpacing growth in the main cabin, while managed corporate revenue climbed 26%. The airline also reported a five-percentage-point increase in customers upgrading from Basic Economy to Main Cabin after making changes to its fare offerings.

The result is a business model that’s becoming less dependent on raising economy ticket prices. Instead, airlines are increasingly generating incremental revenue from premium cabins, loyalty programs, co-branded credit cards, paid upgrades and higher-spending travelers.

It’s also helping mitigate the brunt of rising fuel costs. “In the second quarter, fuel expense increased by over $2.2 billion, or 83% year over year,” CFO Devon May noted. Isom confirmed how well American is dealing with it. “The second quarter helped offset nearly 50% of the $2.2 billion year-over-year increase in fuel expense.”

This, coupled with the company being able to hold “non-fuel year-over-year unit cost growth to under 3%” have been helping American fly through fuel inflation.

For investors, American’s latest quarter offers a reminder that the industry’s earnings story isn’t simply about higher fares. It’s increasingly about extracting more value from each traveler—even while inflation-adjusted airfares remain below where they were before the pandemic.

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