American Airlines Group Inc. (NASDAQ:AAL) saw its stock rise 4.2% to $17.22 during midday trading on Thursday, largely recovering from a sharp decline the prior day fueled by rising oil prices. The rebound outpaced gains among other major U.S. carriers and the broader airline ETF, signaling investor optimism despite persistent headwinds from fuel costs.
The rally came after American Airlines shares fell approximately 4% on Wednesday following renewed tensions between the U.S. and Iran, which pushed crude oil prices higher. By Thursday afternoon, the stock had bounced back, though the underlying fuel cost issue remains unresolved and poses a significant risk to earnings.
Fuel Costs Remain a Key Concern
Jet fuel prices are now a primary driver of American Airlines' stock movements, often overshadowing travel demand trends. The airline's sensitivity to fuel costs is acute, as the industry's largest expense—fuel—can swing rapidly. According to the U.S. Transportation Department, U.S. airlines spent $6.66 billion on fuel in May, an 85% increase year-over-year, as reported by Reuters.
Brent crude oil traded near $79.28 per barrel late Wednesday after U.S. military strikes on Iran, while West Texas Intermediate crude stood at $74.76. The Strait of Hormuz, a critical chokepoint for global oil shipments, handled about one-fifth of the world's oil supply before the conflict, according to Reuters.
Earnings Season Ahead
Investors have a narrow window before American Airlines reports its second-quarter earnings on July 23. The company will host a webcast at 7:30 a.m. CT that day. Wall Street will scrutinize whether higher fares, improved revenue, and ancillary fees can offset rising fuel expenses.
CEO Robert Isom said in May that the airline is “not making any changes” to its forecast despite higher fuel prices. He noted that demand is following a K-shaped trend, with wealthier travelers outperforming budget-conscious customers. Isom also reported that the airline was approximately 80% booked for the second quarter and that business travel had increased 13% year-over-year.
Financial Snapshot
American Airlines reported record first-quarter revenue of $13.9 billion but posted a GAAP net loss of $382 million. Total debt stood at $34.7 billion at quarter-end, dipping below $35 billion for the first time since mid-2015. The company's adjusted EPS outlook for 2026 ranges from a loss of $0.40 to a profit of $1.10, with Q2 revenue expected to be up 13.5% to 16.5% compared to 2025.
Analyst View and Risks
Melius Research analyst Conor Cunningham downgraded American Airlines to Hold from Buy, setting a $19 price target. He cited strong demand but noted that the airline's controllable costs are lower than those of Delta and United. However, the stock could face renewed pressure if crude prices climb further, if Strait of Hormuz disruptions lift jet-fuel costs, or if fare increases fail to pass through without dampening demand.
The bear case highlights American Airlines' heavy debt load and thinner earnings margins, leaving less room to absorb a fresh fuel shock compared to rivals with stronger balance sheets and wider margins.
