American Airlines Group Inc. lowered its full-year earnings target, saying it may end 2026 with a loss as the carrier absorbs $4 billion in additional fuel costs from the war in Iran.
The new forecast ranges from a loss 40 cents to a $1.10 profit, American Airlines said as it reported earnings on Thursday that beat estimates. Its original target predating the US-Iran predicted a profit of $1.10 to $2.70.
The more muted outlook puts the airline in company with other carriers that have revised or outright pulled guidance amid surging fuel prices. United Airlines Holdings Inc. on Wednesday warned it may take time for higher fares to offset the impact. Southwest Airlines Co. declined to update its full-year profit guidance when it reported profit and revenue that fell just shy of Wall Street’s expectations, mirroring the stance of Delta Air Lines Inc.
Fort Worth, Texas-based American Airlines beat Wall Street’s expectations for quarterly earnings, reporting an adjusted loss of 40 cents a share for the three months through March, better than the 46-cent loss predicted by analysts polled by Bloomberg. Operating revenue rose 11% to $13.91 billion, also beating predictions.
The stock rose 3.9% in New York trading. American has lost 22% in value this year, twice as much as the Bloomberg World Airlines Index of 60 members in the period.
“This year we have this fuel increase and we are going to do what’s needed on capacity to make sure that we are passing on as much of that fuel increase to customers as possible,” Chief Financial Officer Devon May said on a call with analysts. “We’ll be watching for the next 4 to 6 weeks before we have to make some capacity decisions for August and September.”
Airlines are trying to protect their balance sheets during a complex and deeply uncertain moment in the industry, hoping strong demand from premium and international fliers will hold up against rising fares used to offset rising fuel prices triggered by America’s protracted war in Iran.
American ended the quarter with a total debt load of $34.7 billion, the first time it’s been below $35 billion in more than a decade. It has worked to cut its debt from more than $50 billion at the height of the pandemic.
President Donald Trump’s administration is nearing a rescue package for Spirit Airlines that could give the US government the option to own as much as 90% of the carrier once it emerges from bankruptcy, Bloomberg reported on Wednesday.
Meanwhile, American and Alaska Air Group Inc. are pursuing potential revenue-sharing agreements and other strategic partnerships but are holding off on the idea of a full merger, Bloomberg also reported. In March, American’s May said the carrier would consider tapping the debt market for extra liquidity as soon as the second quarter if increased fuel prices persisted.
American said last week it’s not interested in any discussions regarding a merger with United, following a Bloomberg report last week that Scott Kirby, United’s chief executive officer, in February floated the possible combination directly to Trump.
“I want to stress that the idea of the two largest airlines in the world getting together, that is something that we’ve viewed as being anti-competitive,” American CEO Robert Isom said on the call with analysts. “And obviously, everybody that has weighed in suggests the same thing.”
“Bad for customers, bad for the industry, and then, ultimately, that would be bad for American Airlines,” he said.
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