While rivals such as Delta Air Lines (NYSE: DAL) have worked hard to balance capital spending discipline with the need to update their fleets, top U.S. airline American Airlines (NASDAQ: AAL) has spent freely on new aircraft in recent years. Between 2014 and 2017, American's capex totaled a whopping $23.1 billion, nearly as much as its current market cap. The vast majority of that spending went toward new planes.

As a result, American Airlines has the youngest fleet among major airlines -- but also by far the most debt. Management shows no sign of becoming more frugal in the future. Instead, the carrier recently confirmed that it will replace 45 of its older Boeing (NYSE: BA) 737-800s by the end of 2020, even though these planes should have at least five to 10 years of life left in them.

American Airlines will retire 45 of its Boeing 737s by the end of 2020. Image source: American Airlines.

American Airlines takes on debt to upgrade its fleet

Since the American Airlines-US Airways merger closed in late 2013, the combined company has replaced hundreds of planes, including roughly a third of its mainline fleet. American Airlines generated plenty of cash flow during this period, because of favorable industry conditions. However, the company chose to spend most of this cash on share buybacks, while paying for the fleet upgrades with massive debt issuances.

This strategy has caused Americans' debt burden to balloon from $16.8 billion at the end of 2013 to $25.3 billion by the end of 2017. (It has also used up more than $4 billion of its cash and short-term investments during that period.) Meanwhile, profitability has receded in each of the past two years and could fall further in 2018.

By contrast, Delta Air Lines has routinely produced stronger margin performance than American Airlines since 2016, while holding its debt below $10 billion.

Delta Air Lines vs. American Airlines Operating Margin and Long-Term Debt, data by YCharts.

With profitability plunging and interest rates creeping up, it would seem prudent for American Airlines to cut capex as much as possible so that it can focus on paying down debt. Indeed, Americans' scheduled debt maturities average more than $3 billion annually between 2018 and 2021. However, while capex will decline in the years ahead, management is still spending more than necessary on new aircraft.

The new aircraft obsession continues

American Airlines' January investor update indicated that the carrier's fleet of Boeing 737-800s would decline from 304 today to 259 by the end of 2020. That said, airline fleet plans often assume that all leased aircraft will be returned at the end of the lease term, even though the leases are often renewed.