American Airlines Group Inc. (NASDAQ:AAL) confronts a significant financial challenge as it prepares to report second-quarter earnings on July 23. The carrier's fuel cost assumptions are under scrutiny after United Airlines reported a higher average jet fuel price of $4.19 per gallon for the quarter, compared to the $4.00 per gallon American built into its April guidance. This 19-cent gap translates to a potential $221 million swing in fuel expense, based on American's consumption of 1.163 billion gallons in the second quarter of 2025.
The sensitivity analysis, which excludes fare recovery, income-tax effects, and changes in fuel burn, underscores the pressure on American's already tight earnings outlook. The airline guided for adjusted earnings between a loss of 20 cents and a profit of 20 cents per share for the quarter. A fuel cost overrun of this magnitude could push results toward the lower end of that range or even below, depending on revenue performance and cost controls.
United's strong second-quarter results set a high bar for comparison. The carrier reported a 16% revenue increase, a 12.1% gain in unit revenue (revenue per seat-mile), and managed to recover about half of its $2.3 billion year-over-year increase in fuel costs. United posted adjusted earnings of $1.99 per share, driven by what CEO Scott Kirby described as swift and decisive schedule adjustments following the spike in oil prices.
Revenue and Capacity Comparison
American's April guidance projected revenue growth of 13.5% to 16.5% and capacity growth of 4.0% to 6.0%. At the midpoints, this implies unit-revenue growth of about 9.5%, which is roughly 2.6 percentage points below United's actual result. While differences in network and fuel purchasing strategies mean this comparison is not direct, it suggests American may need to achieve revenue near the top of its forecast range or find additional cost savings to absorb a fuel bill comparable to United's.
American's assumed fuel price of $4.00 per gallon in April has been overtaken by market realities. The Argus U.S. Jet Fuel Index stood at $3.53 per gallon on July 15, below American's assumption, but United's reported average of $4.19 highlights the volatility in fuel markets. The risk is amplified by renewed oil price volatility; United noted that fuel price increases since early July have added $575 million to its expected third-quarter costs.
Balance Sheet and Liquidity Concerns
American's financial position remains more leveraged than United's. As of March 31, American reported $34.7 billion in debt and related obligations, with $10.8 billion in available liquidity, resulting in a debt-to-liquidity ratio of 3.2 times. In contrast, United's June 30 figures show $26.5 billion in debt and $19.6 billion in liquidity, a ratio of 1.4 times. American has reduced its total debt below $35 billion for the first time since mid-2015, but delayed fare recovery would still consume more of its financial cushion.
United raised $3.7 billion in new liquidity during the quarter and prepaid about $1 billion of higher-cost debt, strengthening its balance sheet. American's higher leverage makes it more vulnerable to fuel cost shocks and slower revenue recovery.
Management Actions and Outlook
American added financial expertise to its board on Wednesday, electing John W. Dietrich, former chief financial officer of FedEx Corp. (NYSE:FDX), to its audit and finance committees. Chairman Greg Smith cited Dietrich's experience in financial discipline and risk management. While this appointment will not affect second-quarter results, it signals a focus on strengthening financial controls as fuel and debt shape the investment case.
CEO Robert Isom stated in April that American expected modest profitability for the year under the forward fuel curve at that time. The airline will update investors on July 23 at 7:30 a.m. Central Time. Shares were indicated at $15.63, down 0.4%, before regular U.S. trading. The key metric for investors will be not just revenue growth, but how much of the fuel cost increase is passed through to customers via higher fares.
American's managed corporate revenue was up 13% and co-branded credit-card spending rose 9% entering the quarter, providing some support. However, the risk of renewed oil volatility remains, with United's third-quarter cost warning highlighting the broader industry challenge. The earnings report will reveal whether American's revenue and cost management can offset the fuel headwind and deliver results within its guided range.
