American Airlines Eyes Capacity Cuts as High Fuel Prices Persist

American Airlines (AAL) and United Airlines (UAL) may cut capacity if fuel prices stay high. Both carriers report strong demand but face higher costs. AAL expects Q3 revenue to rise 16-19% YoY, with durable gains. UAL is already canceling some December flights and may adjust further in Q1 2024 and 2027. Both aim to protect profits by trimming less-profitable routes.

United Airlines and American Airlines may cut capacity in Q4 due to high fuel prices, according to executives at a Morgan Stanley conference. American estimates $1B in extra fuel costs for Q4, while United forecasts $6B for 2026. Both stocks reacted with volatility. American is down 16% YTD, United down 5%.

American Airlines Group reported Q2 2026 revenue of $16.7B, up 16.3% YoY, with passenger, cargo, and other revenue at $15.2B, $273M, and $1.2B respectively. Net income fell 88.2% to $71M due to an 83.3% rise in fuel costs to $4.9B. The company completed $2.7B in financing, refinanced $1.1B in loans, and purchased 14 Boeing 737 MAX aircraft.

Shares of American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL), and Southwest Airlines (LUV) rose 3-4% overnight after a U.S.-Iran peace deal raised hopes for lower fuel costs. Brent crude futures fell 4.6% to $83.3/barrel. Airlines have faced higher fuel expenses, with IATA estimating 2026 costs at $350B. AAL and UAL had cut earnings forecasts due to rising fuel prices.

American Airlines is investing $4 billion to expand DFW Airport's Terminal F to 31 gates. The airline is also restructuring its flight schedule from nine to 13 banks to improve reliability, especially during weather disruptions. This change aims to reduce the impact of delays and improve on-time performance, customer connections, and baggage handling. American is also adding block time to flights and investing in remote deplaning capabilities to enhance operational resilience.

Barclays cut price targets for United (UAL), Delta (DAL), and American Airlines (AAL) due to higher fuel costs, but maintained 'Overweight' ratings, citing strong revenue growth. July fuel costs eased month-over-month but remained high. All three stocks declined last week, with AAL down the most. BTS data showed a 1.8% drop in total fuel expenditure in July, but costs were up 45.4% year-over-year.