Overview
- On Thursday, July 23, American reported record second-quarter revenue and an earnings beat while warning that fuel costs are eroding profitability.
- The company said second-quarter jet-fuel expense rose roughly $2.2 billion year over year, or about 83%, and that it paid about $4.05 per gallon in Q2.
- Management narrowed full-year adjusted EPS guidance to a range of a $0.65 loss to a $0.65 gain, with the midpoint effectively at zero, and it now models about $3.75 per gallon for Q3 fuel.
- Investors reacted with sharp volatility, sending the stock down about 8% on the guidance and then back up roughly 6.8% the next trading day.
- Analysts note American is more exposed than some peers because of thinner margins and heavier debt, and the airline is responding by raising fares that offset about half the Q2 fuel hit, trimming planned capacity growth, and relying on cash on hand to weather further price swings.