Fuel Exposes American’s Older Problem

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American Airlines is falling behind United and Delta—approximately $3 billion behind United and $5 billion behind Delta in annual profits. Speaking with CNBC, Isom emphasized that American and its nearly 140,000 employees want “to be best at everything that we do.”

Headline numbers

Revenue: $16.7B, up 16.3% YoY, a 2Q record — all regions and premium segments beat expectations
GAAP net income: $71M, down 88% YoY
Adjusted EPS: $0.15 vs. $0.03 consensus — a 228% beat on a tiny number, which is a bit of a hollow victory given the scale of the YoY decline
Operating margin: 2.7%, down from 8.2% a year ago
No surprise, the stock fell ~8%, closing around $13.64

One Number Explains the Drop

GAAP net income was $71 million, down 88% year over year. That’s not close to what happened at American’s two closest rivals over the same quarter: Delta’s profit fell 25%, United’s fell 17%. American’s decline is roughly three to five times steeper than either.

The direct cause is fuel. American’s fuel expense hit $4.88 billion in the quarter, up 83% year over year — a $2.2 billion hit in 2Q

alone, part of a $6 billion full-year headwind management is now guiding to. Every major US carrier is handling the same fuel spike this earnings season; American is just eating more of it, proportionally, than anyone else.

American Airlines is falling behind United and Delta—approximately $3 billion behind United and $5 billion behind Delta in annual profits. Speaking with CNBC, company CEO Robert Isom emphasized that American and its nearly 140,000 employees want “to be best at everything that we do.”

Headline numbers

Revenue: $16.7B, up 16.3% YoY, a 2Q record — all regions and premium segments beat expectations
GAAP net income: $71M, down 88% YoY
Adjusted EPS: $0.15 vs. $0.03 consensus — a 228% beat on a tiny number, which is a bit of a hollow victory given the scale of the YoY decline
Operating margin: 2.7%, down from 8.2% a year ago
No surprise, the stock fell ~8%, closing around $13.64

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