American Airlines will contribute $1,000 to Trump Accounts opened for eligible children of its employees, matching the federal government’s $1,000 seed contribution. This is a parting gift from Nate Gatten to the administration as he leaves to head government relations for Apple, and helps to set the airline up for continued good relations with the airline’s regulators after he’s gone.
This is clearly mostly political. It’s also not that expensive for American to sign onto.
- It’s not a match of money that employees put into the accounts. American is matching the government.
- Children who qualify for the $1,000 federal payment are limited to U.S. citizens born from January 1, 2025 through December 31, 2028 with valid Social Security numbers.
American says thousands of children could qualify. The company also plans to let employees make pretax payroll contributions to Trump Accounts for dependent children beginning next year, once the government’s employer rules are finalized. About one-third of its workforce may be able to use that payroll feature. Most probably shouldn’t.
The airline specifically thanked the Trump administration and Congress for creating the accounts.
What This Could Cost American
American hasn’t announced a budget for the program. It reported 143,400 full-time equivalent employees at the end of June, including workers at its wholly owned regional airlines.
A reasonable estimate is that the one-time payments will cost American somewhere around $8 million to $18 million, and my back of the envelope best guess is ~ $12 million.
- Assuming 2%–3% annual incidence of employees having an eligible child, repeated over four years
- 70%–90% participation
It’s speculative because the final number depends on births through the end of 2028 and how many parents actually open the accounts. American spends about $18.5 billion on personnel costs annually. This is fairly immaterial. But American is taking on additional expense when it already has relatively high labor costs and isn’t making money.
As of December 31, 2025, American Airlines reported $17.9 billion in net operating loss and federal tax carryforwards. They’re not seeing any tax benefits from the Trump account payments for a very long time.
Trump Accounts Aren’t Especially Attractive For Your Own Money
Trump Accounts are individual retirement accounts owned by children. Any qualifying child under 18 with a valid Social Security number can have one, although only U.S. citizens born during 2025 through 2028 receive the federal government’s $1,000.
Families and employers generally can contribute a combined $5,000 per year. Employer contributions are limited to $2,500 per employee and are not taxable income to the employee.
During childhood, the money must remain invested in low-cost U.S. equity index funds. The default portfolio is State Street’s SPDR Portfolio S&P 500 fund with several Vanguard, iShares and State Street funds also being added.
The money generally can’t come out before the beginning of the year in which the child turns 18. Then the account becomes a traditional individual retirement account. Distributions are taxed as ordinary income, with a 10% penalty before age 59 1/2 unless an exception applies.
The government’s $1,000 and American’s $1,000 are free money to employees, who should take both. Additional after-tax money makes less sense unless the parents have already maxed out better opportunities.
Family contributions don’t receive a tax deduction. The earnings eventually come out as ordinary income rather than capital gains. The money belongs irrevocably to the child and cannot be moved to a sibling.
It’s better to fund an employer retirement plan match, health savings account and a parent’s own tax-advantaged retirement accounts first. A 529 account is normally better for education because qualified withdrawals are tax-free, states can provide contribution incentives, and the beneficiary can be changed. A custodial Roth individual retirement account is better once the child has earned income.
The niche play is American’s planned pretax payroll deduction, which may be appealing to parents who have already maxed out their own retirement and want to transfer (modest) wealth to a child. It essentially provides traditional individual retirement account treatment for a child who has no earned income.
A Cheap Way To Build Goodwill With The Trump Administration
American says this is about investing in its people. American already spends heavily on its people, in part because it performs more work in house and owns three regional airlines that competitors might outsource.
That doesn’t mean spending another dollar on employees is bad. But this is an oddly narrow way to do it – employees without new births in a limited period of time get nothing. That’s not an answer to employee morale, service or productivity.
But these are literally called Trump Accounts. The Trump administration has actively recruited corporate participants and publicizes the companies that sign on.
And American Airlines is one of the most heavily regulated companies in the country. The Department of Transportation and Federal Aviation Administration handle safety oversight, operating approvals, slots, airport capacity, air traffic control, airport security, passenger compensation – not to mention involvement in potential mergers and acquisitions.
Like his predecessor, Transportation Secretary Sean Duffy is unusually political. Other Cabinet secretaries flatter the president. Duffy seems to work harder at it than even much of the rest of the cabinet.. Duffy previously worked for a lobbying firm representing an airline coalition that included American, Delta and United. He headlined an American Airlines safety conference with CEO Robert Isom in April.
When American rejected United’s reported merger overture this spring, it began its statement by praising “the leadership and strong support of President Trump, Secretary Duffy and numerous other leaders in the Administration.” A regulated company wants the people regulating it to view the company favorably.
In 2018 American gave employees $1,000 and credited the first Trump administration’s tax legislation. That cost about $130 million and benefited nearly everyone. This program should cost roughly one-tenth as much.
Discussion
Commercial Aviation was always a difficult business. Routes were regulated as a public good and that meant high ticket prices. 1978 deregulation lowered ticket prices, but the competition airlines demanded has left the entire industry on permanent life-support. For years now airlines have depended on subsidies, credit cards and loyalty programs to keep flying. They got customers addicted and then they also got hooked.We can try changing flight paths at airports one by one. But we can also limit frequent flyer miles and reduce noise for every airport community in one stroke. If there is a national agenda that needs to be part of it.