American Airlines Cuts 2026 Profit Outlook Again as War-Linked Fuel Costs Rise; Southwest Beats Estimates but Trims Full-Year Range

A Record Quarter Wasn't Enough

American Airlines just posted one of the best revenue quarters in its history: $16.7 billion, up 16.3% from a year earlier^[1]. Passengers kept booking. Prices held. And yet on July 23, 2026, the company cut its profit forecast for the year — the second cut in three months^[1][2].

That's the contradiction sitting at the center of this story. Demand didn't fall apart. Revenue didn't shrink. American now expects full-year adjusted earnings somewhere between a loss of 65 cents a share and a profit of 65 cents a share. Back in January, it had forecast a profit of $1.70 to $2.70 a share^[1]. Investors reacted fast, sending the stock down about 9.2% in a single day, its worst one-day drop in a year^[2].

Southwest Airlines told a version of the same story a day earlier. It beat Wall Street's quarterly estimate by a wide margin, posting adjusted earnings of 94 cents a share against a forecast near 52 cents^[4]. But instead of raising its full-year outlook, Southwest narrowed it, replacing an earlier floor of "at least $4.00" a share with a tighter range of $3.25 to $4.25^[4][6]. Two airlines, two strong quarters, two shrinking forecasts. The word behind both is fuel.

The Chokepoint Behind the Numbers

Jet fuel normally makes up about a fifth of an airline's operating budget, and airlines don't get to set that price — global oil markets do^[8]. After the United States and Israel struck Iran early in 2026, those markets moved hard.

The mechanism traces back to one narrow shipping lane: the Strait of Hormuz. It normally carries about a fifth of the world's oil^[13]. After the conflict escalated, traffic through the strait fell by an estimated 90% to 95%^[13]. Less oil moving through one chokepoint means tighter supply everywhere, all at once, for every airline on earth.

U.S. government data shows how fast this hit. Airlines spent 56.4% more on jet fuel in the month after the war began, and prices reached about $4.11 a gallon in April, up 78% from a year earlier^[8]. The global trade group IATA projects the industry's total fuel bill will climb to about $350 billion this year, up from roughly $252 billion, and warns the squeeze could cut worldwide airline profit nearly in half^[7].

That shock lands on every carrier, but not equally. Some airlines protect themselves through fuel hedging — buying contracts ahead of time that lock in a price before it rises. A carrier that hedged well pays less now, no matter how it's otherwise run. Debt and pricing power matter too. Southwest's revenue per seat jumped roughly 20%, which helped it absorb the shock better than the more heavily indebted American did in its outlook^[4].

Two Profit Numbers, Same Three Months

American's own results hide a second puzzle, because the company reported two different profit figures for the identical quarter. Its official, audited net income was $71 million, or 11 cents a share. That's down about 88% from $599 million, or 91 cents a share, a year earlier^[1]. On its face, that looks like a bad quarter.

But American also reported an "adjusted" profit of 15 cents a share — a figure that strips out one-time items like swings in the value of its fuel-hedging contracts. That adjusted number actually beat what analysts expected, which was around 5 cents a share^[1][15]. Both numbers describe the same three months. They just measure different things, and the full-year guidance American keeps cutting is stated in that adjusted format, not the audited one^[1].

That distinction changes how the whole story reads. American beat expectations for the quarter that just ended, even while warning the rest of the year looks worse. Those two claims aren't in conflict — they reflect the fact that fuel costs are projected to keep rising, adding an estimated $700 million in the third quarter alone and nearly $1.6 billion for the rest of 2026^[1].

Why Each Side Tells It This Way

American's management wants this read as an outside shock, not a sign of a struggling airline. It points to record revenue, resilient demand and the adjusted-earnings beat as proof its core business works, with fuel as the one factor pulling against it^[1][15]. There's a practical reason for that framing, too: a heavily indebted company has an interest in reassuring investors and lenders, and setting expectations low now makes future results easier to beat^[2].

Southwest describes its quarter as proof that a multi-year overhaul of its pricing and fees is paying off, calling the results "earnings power on full display"^[5]. Standing apart from a struggling rival during an industry-wide squeeze gives Southwest a reason to spotlight its beat and downplay its lowered floor^[4][5][6]. It isn't immune either — Southwest guided next quarter's profit to 50 to 75 cents a share, below the roughly 82 cents analysts wanted^[4].

Travelers see almost none of this math. What they see is higher prices. U.S. domestic fares were up about 24% year over year by late April, and international fares about 16%^[9]. United's chief executive has said fares may need a permanent 15% to 20% increase just to cover the new baseline cost of fuel^[14]. American has already suspended six U.S. routes through August and September to cut costs^[12].

IATA, the industry's global trade body, frames the whole episode as a supply crisis rooted in geopolitics, not mismanagement by any one airline. It says carriers worldwide cut roughly 2 million seats from May schedules and canceled thousands of flights as regional fuel supplies tightened^[9]. The disruption may be removing around 620,000 barrels a day of jet fuel and kerosene supply this quarter^[13].

Same Facts, Different Front Pages

News outlets covering this story largely agree on the numbers. Where they differ is what they put first. CNBC and Bloomberg, both U.S. business outlets, stayed close to the earnings figures, though Bloomberg leaned toward the more dramatic angle, leading with the possibility of a full-year loss^[1][2].

Fox Business, on the U.S. right, put the war itself in the headline as the direct cause, describing fuel prices as "soaring" because of the conflict^[11]. The Washington Post, on the U.S. center-left, led instead with what rising fares mean for travelers planning trips — a consumer-service angle rather than a corporate one^[10].

Al Jazeera, funded by the Qatari government, framed the story around the Strait of Hormuz and the U.S.-Israel strikes on Iran, emphasizing worldwide seat cuts over any single airline's earnings^[9]. Benzinga struck a more even balance, pairing American's estimate beat with its guidance cut in the same headline^[15]. None of these framings contradicts another — each simply puts a different piece of the same fuel shock first.

What's Still Unknown

Nobody disputes that fuel prices roughly doubled, or that the Strait of Hormuz is the reason why^[8][13]. What's still unsettled is how long the disruption lasts, and how much of it airlines can pass on to passengers before people start flying less. American's next guidance update, whenever fuel costs move again, will be the real test of whether this quarter's pattern holds.