American Airlines Earnings Were Good. Why the Stock Never Stood a Chance Today.

American Airlines stock has fallen 20% this year as surging fuel costs have hit the sector. (DREAMSTIME)

Key Points

• American Airlines reported a third-quarter loss of 28 cents per share on revenue of $16.3 billion, beating analyst expectations.
• Shares fell ahead of the market open as Brent crude futures jumped 3%.
• American Airlines lowered its full-year forecast to an expected loss of $1.00 to $1.60 per share due to rising fuel costs.

American Airlines picked a bad day to report earnings. In fact, it chose a bad month and a bad year, too.

The carrier had a pretty good quarter all things considered. Its 28 cents per share loss was better than the 36 cents expected by analysts. Revenue jumped 19% to $16.3 billion, also beating expectations. Yet the stock was falling 3.6% ahead of the open.

Demand has remained really strong, which is undoubtedly saving the sector’s stocks from sharper falls.

There’s one huge problem facing American, and all U.S. carriers, at the moment—sky-high fuel costs. Oil prices have been piloting airline stocks for months, so it’s no surprise that a 3% jump in Brent crude futures is dictating the direction of travel this morning.

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American said fuel expenses jumped by $1.9 billion, or 68% in the third quarter. And it’s probably going to get worse. The carrier is expecting an average fuel price of $4.70 per gallon in the fourth quarter, up from $3.85 in the third quarter and almost double the price it paid in the same period last year.

As a result, it now expects a full-year loss of between $1.60 and $1 per share, down from a previous range between a 65 cents profit and 65 cents loss. It’s worse than the $1 per share loss Wall Street was looking for.

Southwest Airlines also cut its full-year profit outlook late Wednesday.

For those looking for a silver lining in the clouds, if—and it’s a big if—fuel prices do come down then American’s strong demand, across segments, sets it up for a comeback.

Write to Callum Keown at callum.keown@dowjones.com

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