American Airlines Group Inc. (NASDAQ: AAL) saw its shares decline 1.2% in premarket trading on Tuesday, September 1, 2026, as rising oil prices added to the carrier's already strained earnings outlook. The stock was trading at $13.2685 by 08:38 EDT, down from Monday's closing price of $13.43.
The drop came as Brent crude oil surged 2.7% to $92.29 per barrel, following U.S. military strikes on Iranian missile launchers near the Strait of Hormuz. This geopolitical tension has heightened concerns about supply disruptions, pushing energy costs higher and putting immediate pressure on airline stocks.
Fuel is the largest and most volatile cost for airlines, and the recent spike is particularly problematic for American Airlines, which operates with a razor-thin net margin. The company consumed 1.204 billion gallons of fuel in the second quarter of 2026. According to SEC filings, a $0.10 increase per gallon translates to approximately $120 million in additional pretax costs—a figure that is 1.7 times the company's total GAAP net income of $71 million for the quarter.
Record Revenue, But Fuel Costs Soar
American Airlines reported record revenue of $16.7 billion for the second quarter, a 16.3% increase year-over-year. However, fuel expenses ballooned by 83.3% to $4.88 billion, nearly wiping out any earnings gains. The company's net margin stood at just 0.4% for the quarter, underscoring the fragility of its profitability in the current fuel price environment.
CEO Robert Isom noted that revenue growth was "exceeding our initial expectations," with corporate revenue climbing 26%. However, the sharp rise in fuel costs offset much of that growth, leaving the company with a narrow path to profitability.
Guidance and Analyst Outlook
For the third quarter, management has based its fuel cost assumptions on $3.75 per gallon. The company forecasts an adjusted loss per share of $0.70 to $0.10 for the quarter, and for the full year, guidance ranges from a loss of $0.65 per share to a profit of $0.65 per share.
Wall Street remains split on the stock's prospects. Twenty-five analysts have an average price target of $18.50, implying a 39.4% upside from the current premarket price. However, TD Cowen recently lowered its target from $24 to $16, citing elevated fuel expenses. The range of targets spans from a low of $10 to a high of $25.
Analysts forecast essentially no earnings for 2026, with expectations of $2.32 per share in 2027. Based on the current price, that equates to a forward price-to-earnings ratio of 5.7, which may appear attractive but reflects the market's skepticism about sustained profitability.
Liquidity and Risks
American Airlines ended June with $11.3 billion in available liquidity, providing a buffer against near-term financing risks. However, this reserve does not shield the company's margins if fuel prices remain elevated.
Other major carriers also felt the pressure on Tuesday. Delta Air Lines (NYSE: DAL) fell 1.01%, United Airlines (NASDAQ: UAL) dropped 1.64%, Southwest Airlines (NYSE: LUV) declined 0.99%, and JetBlue Airways (NASDAQ: JBLU) slipped 0.87% in premarket trading.
Investors will be watching whether oil prices retreat or if robust ticket sales can offset higher fuel costs. Conversely, supply disruptions or a slowdown in travel demand could lead to results that fall short of expectations.
