Fuel crisis outweighs revenue growth: American Airlines lowers profit forecast

American Airlines has lowered its 2026 profit forecast for the second time in three months due to persistently high fuel prices caused by the war in the Middle East. This is preventing the company from closing the gap with its two biggest rivals—Delta Air Lines and United Airlines— according to Bloomberg.

The company's shares fell 8.3% during trading on July 23, at one point during the session they were down more than 9%, marking their sharpest decline of the year and putting pressure on Delta Air and United Airlines shares—which fell nearly 1.86% and 1.6%, respectively, on Thursday.

In its second-quarter 2026 earnings report, American Airlines stated that its adjusted loss for the full year could reach $0.65 per share. This is worse than the $0.41 loss the company had forecast in late April. However, in the most optimistic scenario, the airline expects to post a profit of $0.65 per share for the period, while analysts expect to see a profit of $0.61, according to Bloomberg.

American Airlines CFO Devon May said during an earnings conference call that just three weeks ago, the company had been more optimistic and had expected to post pre-tax income of about $1.5 billion for the year. However, since the beginning of July, projected fuel costs through the end of the year have jumped by nearly $1.6 billion, which has tempered expectations.

In the second quarter, the company’s fuel expenses rose by more than $2.2 billion (or 83% compared with the previous year), nearly matching the increase in revenue of approximately $2.3 billion, according to Reuters. Overall, the company’s quarterly operating revenue increased by more than 16% year-over-year, reaching a record $16.74 billion in the company’s history. This figure was generally in line with experts’ forecasts, according to Bloomberg.

The airline also stated that in the second quarter, it managed to offset nearly 50% of the negative impact of fuel costs on its financial results by raising fares. May added that American expects fuel prices to remain volatile, according to Reuters.

American continues to expect that higher revenue and ongoing cost control will lead to a significant increase in margins once fuel prices return to normal.

In the second quarter, American's adjusted earnings per share were $0.15, compared with $0.95 a year earlier, while analysts had expected the figure to be $0.03.

The downward revision to the profit forecast highlights the broader challenges facing the aviation industry: Strong demand and higher fares have cushioned the blow from the fuel shock but have failed to shield profits from energy price volatility, Reuters notes.

For American, the risks are even higher. Due to low margins and lagging profitability compared to Delta Air Lines and United Airlines, the company has fewer options for coping with rising costs. This only adds to the pressure on CEO Robert Isom and his plan to steer the company out of the crisis.

In addition, the airline has been trying to tackle a range of operational and strategic challenges—from reducing its debt by approximately $35 billion to attempting to win back corporate clients who were scared off by an unpopular (and ultimately scrapped) marketing strategy, according to Bloomberg.

To gain momentum, the company is trying to promote premium services and loyalty programs—areas that have proven to be more resilient to price fluctuations than basic economy-class tickets, the agency notes. However, unions are putting pressure on American Airlines’ board of directors over lagging profitability, and some are even calling for a change in leadership, Reuters adds. In February, American Airlines pilots and flight attendants blamed Isom and the company’s management for the weak financial results and the inability to close the gap with their largest competitors.

"American's revenue remained strong across all regions thanks to solid growth in the corporate and premium segments, as well as in the loyalty program," says TD Cowen analyst Tom Fitzgerald. “However, the projected RASM (Revenue per Available Seat Mile), based on third-quarter guidance, is likely to disappoint investors given recent forecasts from competitors,” Fitzgerald noted, referring to the metric that reflects revenue per seat per mile flown.

14 out of 28 analysts covering American's stock advise holding it in their portfolios. 12 recommend buying the stock, and only two recommend selling it.

This article was AI-translated and verified by a human editor