A worker refuels an American Airlines jet at DFW International Airport. The Fort Worth-based airline cited rising fuel costs as a reason for a quarterly net loss of $182 million.
2015 File Photo/The Associated Press
American Airlines executives said Thursday that the Fort Worth carrier is working as fast as it can to return to profitability at a speedier rate, as concerns over financial underperformance continue to grow.
“We’re moving in the right direction and with urgency,” CEO Robert Isom said during the airline’s third-quarter earnings call. “We’re not satisfied with the loss, no matter the reason and we will do better.”
Isom’s comments came as American, the dominant carrier at DFW International Airport, disclosed record third-quarter revenue of $16.3 billion, a 19.3% increase year-over-year. Yet, American reported an adjusted net loss of $182 million. American also reported that it expects an adjusted loss of 50 cents and $1.10 per share in the fourth quarter and a full-year adjusted loss between $1 and $1.60.
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The airline did net a few positives during the third quarter. Premium revenue rose 22.9%, and main cabin revenue rose 19.5%. Enrollments in American’s popular frequent flyer program, AAdvantage, also increased 27.4% year-over-year.
The Iran War has sent fuel prices soaring during the year. In turn, airlines have sought to compensate for that extra expense by increasing bag fees and raising fares. American’s fuel expenses for the third quarter increased $1.9 billion, or 67.5% year-over-year, the airline said.
“If you look at the forward curve today, it would effectively tell you that jet fuel prices are going to be over $4 a gallon at least for the first half of [2027],” American chief financial officer Devon May said in an interview. “It starts to ease in the second half, but that’s the forelook right now. That is a higher fuel environment than where we expected it to be 60 days ago.”
Success of rivals
Pressure for American to increase its performance continues to rise. The airline has recently reshuffled its top leadership ranks with the announcement of a new network planning chief and a new leader for technical operations. Several other executives, including cChief commercial officer Nat Pieper, have taken on added responsibilities. The airline’s vice chair and chief strategy officer, Steve Johnson, is retiring at the end of the year.
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But American’s chief competitors at United Airlines and Delta Air Lines continue to succeed despite the fuel drag. Earlier this week, United reported a third-quarter net income of just over $1 billion, while Delta reported a net income of $756 million. Southwest Airlines, which is based at Love Field, also reported net income of $270 million.
“Something’s not adding up at American Airlines,” said Dennis Tajer, a spokesperson for the Allied Pilots Association, the union that represents American’s pilots. “The same cloud layer is over the same golf course that Delta [and] United play, but American has a vastly different score.”
“Clearly there’s something more at American Airlines that makes it a unique underperformer versus Delta [and] United, and we believe that it is a failure of proper revenue management … an obsessive view on market share versus actually focusing on yield.”
American plans to cut its capacity growth in 2027 in comparison with this year in response to the high cost of fuel.
“We have to continue to push on yields,” May said. “We’re posting a loss here in the fourth quarter. That’s not acceptable. So we’re making some adjustments to capacity and then we need to continue to deliver on our revenue initiatives to be making sure we’re offering a product to our customers that they’re willing to pay more for.”
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Isom said that the “significant increase” in fuel prices offset “the strongest quarterly revenue growth of my career.”
“We produced a loss in the quarter that, but for this fuel spike, would have been solidly profitable.” He added during the call that he was confident in the airline’s chances to bounce back in 2027.
“Of course we think we could be profitable next year and that’s driven by what we’ve seen this year,” Isom said.
‘Plenty of questions’
However, some industry analysts questioned whether a return to profitability next year is possible.
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“In a challenging operating environment, peers have proven a higher earnings floor, while the jury is still out on American, whose outcome hinges largely on fuel at any given moment,” Melius Research said in a note released after the earnings call.
The note did acknowledge the airline’s premium unit revenue improvement, but said, “Still, there are plenty of questions about American’s ability to return to sustained profitability in 2027.”
Tajer added: “American is always about next year. And then when you get to next year, it’s always about next year. It’s a never-ending cycle.”
Amid the financial struggles, American over the past several months has announced significant investments to drive more revenue to match its competitors. It has announced the return of seatback screens, completed the first retrofit of its most premium Boeing 777 aircraft, and plans to have Starlink Wi-Fi across more than 1,000 mainline planes.
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American is investing heavily in its airport products, planning massive new lounges at its DFW Airport and Charlotte hubs. The airline is also expected to place an order for new widebody aircraft that could allow it to expand its international flying.