American Airlines dims 2026 forecast as high fuel costs hurt margins

April 23 (Reuters) – American Airlines cut its 2026 profit forecast on Thursday, pushing the lower-end of the range to a loss, as sky-high jet fuel costs driven by the Iran war hurt profit margins.

The airline expects its jet fuel bill to rise by more than $4 billion this year as fuel prices remain higher at about $4 a gallon in the second quarter.

Jet fuel prices, typically accounting for about a quarter of airline operating expenses, have nearly doubled since the conflict erupted, leaving carriers squeezed between spiraling costs and tickets sold in advance at prices they cannot adjust.

Fuel prices surged as U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, a critical corridor for global oil supplies, triggering the aviation industry’s biggest shock since the COVID-19 pandemic.

In the U.S., even though demand has held steady, the cost spike has affected profit margins. Airlines have resorted to fare hikes, capacity cuts and jacking up fees for ancillary services like checked bags to mitigate some of the costs.

The carrier expects a per-share loss of 20 cents at the lower end and profit of 20 cents at the higher end for the second quarter, compared with analysts’ expectations of a 9‑cent loss, according to data compiled by LSEG.

Shares of the company were up about 1% in premarket trading.

Airlines with a significant international presence and with a suite of premium offerings are also expected to weather the turbulence better, with affluent customers having a better capacity to absorb fare hikes.

American Airlines said on Thursday unit revenue from its premium cabin continued to outperform the main cabin.

For this year, the carrier expects to report between 40 cents per share loss and a $1.10 per share profit, compared with $1.70 to $2.70 profit forecast earlier.

It reported an adjusted loss per share of 40 cents for the quarter ended March 31, compared with 47 cents expected by analysts.

Total operating revenue of $13.91 billion also beat Wall Street expectations of $13.79 billion.

(Reporting by Shivansh Tiwary in Bengaluru; Editing by Arun Koyyur)