American Airlines Group Inc. (NASDAQ:AAL) saw its shares climb 5.5% over the past week, yet the carrier's financial performance continues to raise concerns among investors. Despite generating revenue nearly on par with Delta Air Lines (NYSE:DAL), American's adjusted net income was only a fraction of Delta's, highlighting a persistent profitability gap.
In the second quarter, American reported revenue of $16.74 billion, close to Delta's $17.67 billion and United's $17.67 billion. However, American's adjusted net income was just $99 million, compared to Delta's $1.03 billion and United's $649 million. This translates to American retaining only $0.59 of adjusted net income for every $100 in revenue, while Delta kept $5.81 and United $3.67.
The disparity is stark. American projects a third-quarter loss, with adjusted earnings per share expected between -$0.70 and -$0.10. In contrast, Delta forecasts earnings of $2.00 to $2.50 per share, and United expects $2.50 to $3.50. For the full year, American's guidance ranges from -$0.65 to $0.65 per share, while Delta and United project much stronger results.
CEO Robert Isom highlighted American's revenue growth of over 16% year-over-year, with managed corporate revenue up 26% and premium passenger unit revenue rising 13.4%. However, these gains were largely offset by soaring fuel costs, which climbed $2.2 billion—an 83% increase—nearly 22 times the company's adjusted net profit. CFO Devon May acknowledged that fuel costs were "obviously not 100%" recovered, as estimates continue to rise.
The stock's weekly rise came despite a 1.0% decline on Friday, while the S&P 500 advanced 0.7%. Earlier in the week, a nationwide ground stop on Tuesday lasted 48 minutes, causing about 1,100 flight delays and 221 cancellations, according to FlightAware. Despite this operational hiccup, shares ended the week higher.
Adding to the narrative, corporate controller Angela Owens sold 40,077 American shares at an average price of $15.2612, leaving her with 178,799 shares, according to a regulatory filing.
Investors are now looking ahead to key economic data, including July manufacturing figures on Monday, petroleum stockpile numbers on Wednesday, and employment statistics on Friday. The oil inventory update will be particularly scrutinized for its implications on airline fuel expenses.
The core issue for American is not demand—which remains robust—but the ability to convert record revenues into profits. With a slim margin of just 0.9% pretax, the carrier has little buffer against further fuel price spikes, weaker bookings, or operational disruptions. As the market digests these challenges, American's stock performance will likely hinge on its ability to close the profitability gap with its rivals.
