American Airlines Cuts Profit Target on Higher Fuel Costs

This adjustment underscores the challenges volatile fuel markets present to airline earnings. The conflict and subsequent disruption to traffic through the Strait of Hormuz, which previously handled about a fifth of global oil and gas shipments, have created uncertainty regarding future jet fuel costs. Jet fuel prices had previously surged above $5 per gallon in the spring before a temporary truce between the U.S. and Iran led to a sharp decline. However, oil prices have climbed again since the collapse of that agreement in early July, renewing upward pressure on fuel expenses.

American Airlines reported paying an average of $4.05 per gallon for fuel during the second quarter, exceeding the approximately $4 per gallon assumed in its April guidance. Looking ahead to the third quarter, the airline anticipates an average fuel cost of $3.75 per gallon, based on forward fuel curve data as of July 21.