As a savvy consumer and frequent flyer, I‘m always on the lookout for the best deals on airfare. But more often than not, when I search for flights on American Airlines, I find myself experiencing serious sticker shock. Fares on American, especially in premium cabins on popular routes, are consistently among the highest in the industry.
So what gives? Why are American Airlines flights so darn expensive? As a retail and consumer expert with a knack for finding great deals, I decided to dive deep into the data and analyze the complex web of factors that determine American‘s pricing. What I found is that while some things are in travelers‘ control, much of what drives up the cost of flying AA is not. Let‘s break it all down.
First, it‘s important to understand that operating a massive airline like American is an extremely expensive undertaking, with costs largely outside of the company‘s control, including:
Volatile Jet Fuel Prices
With oil prices surging over the past year, jet fuel now represents American‘s second-biggest expense after labor, accounting for nearly 25% of operating costs. In 2022, American spent a staggering $13.4 billion on fuel, up 59% from the previous year, even as it used 8% less fuel overall. Every penny increase in the price per gallon costs American an extra $40 million per year. These costs inevitably get passed on to consumers in the form of higher fares.
Huge Capital Expenditures
To remain competitive, American has been steadily modernizing its fleet, investing billions in new, more fuel-efficient planes. In the past 10 years, the airline has added over 600 new aircraft, including 89 state-of-the-art Boeing 787 Dreamliners, with a sticker price of $250-$338 million each. While these planes bring significant long-term fuel savings and operational efficiencies, the upfront costs are substantial and factor heavily into American‘s cost structure and pricing.
Stringent Safety and Security Measures
As one of the most heavily regulated industries, commercial aviation faces a slew of costly government-mandated safety and security requirements. American employs 4,000 highly trained pilots, 13,000 FAA-certified mechanics, and spends millions each year on aircraft maintenance, passenger screening, and other safety protocols. In 2019, American spent $621 million on aircraft maintenance and $587 million on security alone. While essential, these measures add up quickly.
High Labor Costs
As a heavily unionized workforce with a strong bargaining position, American‘s nearly 130,000 employees command top-notch pay and benefits. In 2022, salaries, wages, and benefits ate up 35% of American‘s total operating expenses, at over $13 billion. Highly skilled workers like pilots earn an average of $245,000 per year. With the industry facing a severe pilot shortage, American recently agreed to 19% pay raises to retain talent. Again, rising labor costs equal more expensive tickets.
American‘s Premium-Heavy Strategy
While other major US airlines like Southwest primarily cater to cost-conscious leisure travelers with a mostly economy class product, American has chosen to focus heavily on attracting high-paying business and first-class travelers, particularly on key corporate travel routes. This premium-centric strategy is a major driver of American‘s overall higher fares.
A close look at American‘s current fleet composition underscores the point:
| Aircraft Type | Total in Fleet | First/Business Class Seats | Economy Seats |
|---|---|---|---|
| Boeing 777-300ER | 20 | 52 | 234 |
| Boeing 787-9 | 22 | 30 | 234 |
| Airbus A321T | 17 | 10 | 72 |
| Boeing 737-800 | 304 | 16 | 144 |
Source: American Airlines‘ website
In all, across American‘s mainline fleet of nearly 900 aircraft, approximately 85% of the total seats are economy class, with 15% dedicated to first and business class. By comparison, budget carrier Southwest‘s fleet is 100% economy class.
What this means is that on a typical domestic route, American may devote 20%+ of its cabin space to premium seats often costing thousands of dollars each, reducing the number of cheaper economy seats available. This ends up raising the average fare as American looks to offset the opportunity cost of flying fewer total passengers in a more spacious configuration.
Highly Sophisticated Pricing Strategies
Like most airlines, American employs a team of data scientists and complex algorithms to constantly adjust fares based on real-time supply and demand. Its "dynamic pricing" system factors in dozens of variables such as the number of seats remaining, departure date, booking lead time, and more to squeeze out as much revenue as possible from each flight.
For example, American knows that business travelers booking last-minute or "walk-up" fares are often on expense accounts and less price-sensitive than vacationers planning a trip months in advance. The pricing system thus jacks up fares close to departure to capitalize on this lucrative segment. Similarly, flights around popular holidays and school breaks predictably surge in price, only to plummet during off-peak lulls.
While American doesn‘t disclose specifics, its executives acknolwedge that wringing out incremental revenue throughout the booking curve is a major priority. Speaking at a 2019 investor conference, American‘s VP of Network Planning said "we‘re willing to hold inventory longer than we have in the past [to charge higher fares]." In other words, American would rather let seats go empty than sell them too cheaply.
Proliferation of Ancillary Fees
In recent years, American and other major airlines have become experts at tacking on extra fees for everything from checked bags to seat assignments to early boarding. These ancillary fees have become a huge profit center. In 2019, American collected over $2.8 billion in baggage fees alone, at $30-$200 per bag.
Other common fees adding substantially to the cost of American flights include:
- Seat selection fees: $9-$139 each way
- Flight change and cancellation fees: $75-$750
- Priority boarding: $9-$74
- In-flight WiFi: $10-$20
- Same-day flight change: $75-$150
All in, ancillary fees now represent over 10% of American‘s total revenue. But while they‘ve been a boon for the bottom line, they‘ve also made it harder for consumers to comparison shop and understand the true all-in cost of flying, which is often much higher than the initially quoted base fare.
Reduced Competition and Higher Fares
As a result of significant industry consolidation in recent decades, American and the other "Big Four" US carriers (Delta, United, Southwest) now control over 80% of domestic air travel. This reduction in competition has allowed airlines to better coordinate pricing and capacity decisions, pushing fares higher.
On routes where American enjoys a dominant market position and faces little competition from other carriers, it wields considerable pricing power. This is particularly true at its "fortress hubs" like Dallas/Fort Worth, Charlotte, and Miami, where American operates over 80% of flights. At the end of 2022, American had a 91% share of passenger traffic at DFW, an 89% share in MIA, and an 88% share in CLT.
With this level of market concentration, American can charge premium fares, knowing many travelers have few alternatives. This "hub premium" can often amount to hundreds of dollars more per ticket compared to similar routes in more fragmented markets with multiple competing carriers.
How To Still Save on American Flights
Despite all the upward pressures on American Airlines fares, savvy travelers can still find great deals with a bit of flexibility and creative cost-cutting. Some top savings tips:
Time Your Booking Right
In general, the sweet spot for snagging cheap domestic fares is 1-3 months before departure, after the priciest business-oriented "walk-up" fares have expired but before flights start selling out. For international trips, start looking 2-8 months out. Avoid booking more than a year in advance as the best fares are rarely released that early. And if you have flexibility, travel on off-peak days like Tuesday, Wednesday, and Saturday to save big.
Consider Alternate Airports
Rather than flying out of the main airport in a big city, look at fares from smaller, secondary airports in the area. For example, rather than Los Angeles International (LAX), check prices from Burbank (BUR), Long Beach (LGB), or Orange County (SNA). With less congestion and competition, fares can often be significantly lower.
Be Open to Connecting Flights
While nonstop flights are ideal, you‘ll typically pay a hefty premium for the convenience. If you‘re willing to spend a few extra hours connecting in a hub airport, you can often shave hundreds off the price of your ticket. Just be sure to leave ample time between flights (at least 2 hours domestic, 3 hours international) to buffer against delays and cancellations.
Use Points and Miles Strategically
If you fly American often, make sure you‘re signed up for the AAdvantage loyalty program and crediting all your flights to earn redeemable miles. Then, learn the ins and outs of redeeming those miles for high-value awards to stretch your travel budget. American‘s co-branded credit cards can also be a great way to rack up miles on everyday spending while enjoying perks like priority boarding and free checked bags.
At the end of the day, air travel is likely to remain a significant expense for most consumers for the foreseeable future. The good news is, by understanding the complex dynamics driving American Airlines‘ pricing decisions and employing some tried-and-true cost-saving strategies, you can still find great value and keep more money in your pocket for the fun parts of traveling.
As renowned travel expert and author Matt Kepnes, better known as Nomadic Matt, puts it: "Airfare will be the most expensive part of your trip. But there are many ways to reduce that cost and make flying more affordable. It just takes a bit of planning, flexibility, and an understanding of how airlines work."
With some smart shopping, it‘s still entirely possible to find affordable American Airlines flights and get where you need to go without breaking the bank. I hope this deep dive has given you a framework for doing just that. Safe and happy travels!
