American Airlines Slashes Outlook, Expects Loss of Up to $1.60 a Share

American Airlines now expects to lose between $1 and $1.60 a share on an adjusted basis this year — a sharp reversal from July, when it guided to earnings of as much as 65 cents a share or a loss of no more than 65 cents. The airline announced the cut Thursday, and its stock fell about 4% in premarket trading.

The Fort Worth, Texas-based carrier is the fourth major U.S. airline to lower its forecast after jet fuel prices spiked following the start of the Iran war. Delta Air Lines, United Airlines and Southwest Airlines all slashed their outlooks this month. Rising fuel costs have pushed airfares up more than 20% from last year, and American plans to slow its capacity growth next year in response.

In plain terms: record demand can't outrun a fuel bill that's growing at double-digit percentages every quarter.

What happened to American's fuel bill?

Jet fuel is airlines' biggest cost after labor, and this year's spike has added billions in expenses across the industry. American's third-quarter fuel bill jumped 67.5% from a year earlier to $4.64 billion.

That surge swallowed an otherwise strong quarter. Revenue rose 19.3% year over year to $16.34 billion — a record — yet the airline still posted a net loss of $269 million, or 41 cents a share, compared with a net loss of $114 million, or 17 cents a share, a year earlier. Stripping out one-time items, the adjusted loss came to 28 cents a share.

Here's how the quarter stacked up against Wall Street estimates compiled by LSEG:

• Loss per share: 28 cents adjusted vs. 35 cents expected
• Revenue: $16.34 billion vs. $16.22 billion expected

American beat on both lines. It just didn't beat by enough to cover fuel.

What did CEO Robert Isom say?

CEO Robert Isom framed the quarter around the top line, not the bottom. "American delivered record third-quarter revenue and the strongest year-over-year revenue growth in my career, with premium performance leading the way," Isom said in a news release. "The investments we are making across the four pillars of our commercial strategy are working, and we expect another quarter of record revenue growth to close out the year."

The emphasis on premium performance tracks with where American has been putting its money. The airline has invested in new lounges and revamped cabins with more premium seats, chasing the higher-margin traffic that has kept Delta and United profitable.

What does the fourth quarter look like?

American guided to a fourth-quarter adjusted loss of between 50 cents and $1.10 a share. Revenue is expected to rise as much as 22.5% from a year earlier, with capacity up between 5.5% and 6.5%.

That capacity figure matters most. A carrier growing seats at that pace while planning to slow growth next year is signaling it doesn't believe higher fares alone will fix its margin math.

Why is management changing?

Isom has been under sustained pressure to boost profits at a carrier that has trailed profitable rivals Delta and United dramatically. The management shake-up continues: earlier this month, American named a new network chief — the latest in a series of moves that includes new hires in its operations department and commercial team. Last year, the airline brought in industry veteran Nat Pieper as commercial chief.

The bet is that premium cabins, new leadership and a slower growth plan can close the profitability gap. With fuel up 67.5% and four major carriers cutting guidance in a single month, that gap just got harder to close.