American Airlines cut its 2026 profit forecast on Thursday, pushing the lower-end of the range to a loss, as sky-high jet fuel costs driven by the Iran war hurt profit margins, reports Reuters.
The airline expects its jet fuel bill to rise by more than $4 billion this year as fuel prices remain higher at about $4 a gallon in the second quarter.
Jet fuel prices, which usually account for about a quarter of airline operating expenses, have nearly doubled since the conflict erupted, leaving carriers squeezed between spiraling costs and tickets sold in advance at prices they cannot adjust.
The airline, however, posted a smaller?than?expected loss in the first quarter and forecast a better second quarter than Street projections, citing resilient demand and room to pass through some higher costs.
Its shares rose 4 per cent in morning trading.
Fuel prices surged as US-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, a critical corridor for global oil supplies, triggering the aviation industry's biggest shock since the COVID-19 pandemic.
The carrier expects a per-share loss of 20 cents at the lower end and profit of 20 cents at the higher end for the second quarter, compared with analysts' expectations of a 9?cent loss, according to data compiled by LSEG.
In the US, with demand staying resilient, airlines have resorted to fare hikes, capacity cuts and jacking up fees for ancillary services like checked bags to mitigate some of the costs.
That is unlikely to fully offset the surge in fuel costs, prompting major airlines to trim fullyear expectations even as the peak summer travel season begins.
For this year, American Airlines expects to report between 40 cents per share loss and a $1.10 per share profit, compared with $1.70 to $2.70 profit forecast earlier.
