American Airlines issued a stark warning that airfares are likely to remain elevated even if oil prices decline, following record fuel costs that have pressured the carrier's profitability [1]. CFO Devon May told the Financial Times that "if fuel comes down, I think airfares probably stay largely where they're at right now," signaling the airline's commitment to maintaining higher ticket prices regardless of commodity price movements [1]. This stance reflects the airline's strategy to recover yields that had not fully recovered in real terms since the COVID-19 pandemic disruptions [1].
American Airlines reported significantly worse financial performance in its third quarter earnings, updating its 2026 forecast to reflect anticipated losses between $1 and $1.60 per share on an adjusted basis, compared to its July forecast range of a loss of 65 cents to a profit of 65 cents [1]. The carrier's fuel expenses surged 67.5% year-over-year in the third quarter, translating to $1.9 billion in higher fuel costs based on an average price of $3.85 per gallon [1]. Looking ahead, American forecasts even more severe fuel headwinds, expecting an average fuel price of approximately $4.70 per gallon in the fourth quarter—nearly double the fourth quarter 2025 price—which would increase fuel expenses by $2.8 billion year-over-year [1].
Despite the challenging cost environment, American Airlines achieved a 19% year-over-year increase in third quarter revenue, which exceeded the high end of its previous guidance range and represented the highest revenue in company history when excluding post-pandemic years [1]. May explained that airlines' ability to raise fares "ideally should have happened back in 2024, but the industry found itself in an oversupply environment," and that 2024 was "the first year that everything came together in a way that we were able to push yields back up to where they were seven years ago in real terms" [1]. However, the elevated fuel price environment is expected to constrain growth, with American forecasting slower network expansion in 2027 compared with 2026 levels [1]. Industry-wide data shows airline fares were up 22.4% compared with a year ago in September, reflecting the broader impact of surging fuel costs [1].
CONCLUSION
American Airlines' warning that elevated airfares will persist regardless of oil price movements signals a structural shift in airline pricing power, though this comes amid significantly worsened profitability forecasts due to record fuel costs. The carrier's strategy to maintain higher yields represents an attempt to offset massive fuel expense increases, but the projected $2.8 billion year-over-year fuel cost increase in Q4 and slowing network growth suggest the airline remains under substantial financial pressure despite revenue gains.