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American Airlines Reports Q3 Net Loss as Rising Fuel Costs Pressure Profits
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Q3 fuel costs rose, squeezing American Airlines' profits despite strong revenues. Higher jet fuel costs led to a net loss for American Airlines in Q3.
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Fuel costs squeeze profits
American Airlines reported a net loss of 269 million U.S. dollars in Q3 despite generating record revenues of 16.3 billion dollars as rising fuel costs pressured profit margins.
American Airlines said its fuel expense increased by 1.9 billion dollars, or 67.5 percent, with an average fuel cost of 3.85 dollars per gallon, and it expects to pay 4.7 dollars per gallon in the fourth quarter.
Southwest Airlines reported a net income of 270 million dollars with operating revenues rising 21.2 percent to 8.4 billion dollars, but its fuel expenses increased by 821 million dollars year over year.
Southwest Airlines said its Q3 fuel cost was 3.92 dollars per gallon, above prior assumptions of 3.7-3.75 dollars per gallon, and it assumed a fourth-quarter 2026 fuel cost of approximately 4.55 dollars per gallon based on the forward curve as of Oct. 15, 2026.
United Airlines reported Q3 revenue of 17.9 billion dollars, up 17.4 percent year on year, with net income reaching 1 billion dollars, while its fuel expenses increased by 1.8 billion dollars, or 62 percent, and it expects to pay approximately 4.8 dollars per gallon in the fourth quarter.
Airlines trade occupancy
American Chief Financial Officer Devon May told Reuters, "If fuel stays elevated, we have to continue to push yield up so that we can make a bit of money." United's commercial chief Andrew Nocella said during Wednesday's earnings call that its leisure load factor fell 1.3 percentage points in the third quarter and he called it "a trade we would make every day." US airlines increasingly chose to fly with empty seats rather than slash fares to fill them, betting that disciplined pricing and flight schedules would protect profits as jet fuel prices surged roughly 90% since the US-Israeli war on Iran began in February.
Airlines for America, citing Cirium data, said six major US airlines plan to grow domestic capacity 3.0% in the fourth quarter from a year earlier and 3.8% in the first quarter of 2027, compared with 0.2% growth in the third quarter. The Transportation Security Administration screened 2.9% fewer people at US airports in the quarter than a year earlier, and Southwest CEO Bob Jordan told analysts that "Those higher fares are not causing an erosion of volumes" after the airline reported a nearly 22% increase in average passenger fares in the first nine months of this year.
2027 test and guidance cuts
Southwest Airlines cut its full-year adjusted earnings guidance to a range of $2.60 to $2.85 per share after fuel exceeded its projections, and it set fourth-quarter adjusted earnings of 55 to 80 cents per share.
Southwest said its fuel cost reached $3.92 per gallon in the third quarter, up 63.3% from a year earlier, and it expected fuel to cost around $4.55 per gallon in the fourth quarter based on the forward fuel curve as of Oct. 15.
American Airlines lowered its full-year outlook, forecasting an adjusted loss of 1 to 1.6 dollars per share, compared with its previous projection of a loss of 65 cents to a profit of 65 cents per share.
Global Banking & Finance Review said the strategy faced a test in 2027 as industry schedules point to more flying capacity that could intensify competition for passengers even as fuel prices are expected to stay high.
Xinhua said Gulf Coast spot jet fuel prices rose from $2.43 a gallon before the war began in February to $4.63 on October 20, and it said Delta and Southwest cut their annual earnings forecasts while American expects a full-year loss despite sharply higher passenger revenue.