American Airlines produced record revenue in the second quarter and showed genuine progress in premium, corporate, and international demand. But after generating nearly $17 billion in revenue, it kept only $71 million. Fuel explains much of that collapse, but not all of it.
American Airlines Posts Record Revenue, But Its Profit Plunges
American Airlines reported record second-quarter revenue of $16.7 billion, up 16.3% from the same period last year.
Domestic passenger unit revenue increased 10.6%, Atlantic unit revenue rose 8.9%, Pacific unit revenue jumped 15.1%, and Latin America increased 6.6%. Premium passenger unit revenue climbed 13.4%, outpacing an also-respectable 8.8% increase in Main Cabin.
Managed corporate revenue increased 26%, marking the fifth consecutive quarter of double-digit growth.
In that sense, the commercial recovery American has been promising is real.
CEO Robert Isom opened the earnings call by declaring:
“We achieved record quarterly revenue on year-over-year growth of more than 16%. Every entity we serve and every cabin we offer improved meaningfully.”
That is a notable reversal from the commercial strategy debacle that drove away travel agencies and corporate customers in 2023 and 2024. American is rebuilding those relationships, investing in the premium experience, improving its lounges, adding better seats, and making its network work harder.
But all this came at a cost. American generated $16.735 billion in revenue and earned only $71 million in net income in 2026 Q2.
That represents a net margin of less than one-half of 1%.
Fuel Crushed American’s Quarter
American’s fuel expense rose by an extraordinary $2.2 billion, or 83%, compared to the second quarter of 2025.
The airline paid an average of $4.05 per gallon, up from $2.29 one year earlier. Fuel expense reached $4.88 billion for the quarter, nearly as much as American spent on salaries, wages, and benefits.
American says higher fares allowed it to recover nearly half of that fuel increase.
CFO Devon May explained:
“Despite that unprecedented headwind, American was able to recover nearly half of the increase with the strong revenue performance in the quarter.”
Fuel prices have become so volatile that American’s outlook changed dramatically within only a few weeks.
May added:
“Just three weeks ago, we were expecting to guide to full-year pre-tax earnings approaching $1.5 billion, approximately four times our 2025 pre-tax income.”
Instead, American now expects full-year adjusted earnings somewhere between a loss of $0.65 and a profit of $0.65 per share. The midpoint is zero.
For the third quarter, American expects to lose between $0.10 and $0.70 per share, despite forecasting another 16% to 19% increase in revenue.
Isn’t it sobering that American can sell more tickets, charge higher fares, attract more corporate customers, and generate record revenue, yet still struggle to earn anything?
The Comparison With Delta And United Is Brutal
Fuel is a legitimate explanation, but it is not a complete excuse.
Delta and United are buying fuel in the same global market.
United reported second-quarter revenue of $17.7 billion, only about $1 billion more than American, yet generated $805 million in net income. United still expects full-year adjusted earnings of $9 to $11 per share despite projecting a nearly $6 billion annual fuel headwind.
Delta generated $19.8 billion in GAAP revenue, operating income of $1.9 billion, and a 9.4% operating margin. Its full-year adjusted earnings guidance stands at $6.50 to $7.50 per share.
Comparing earnings per share directly is also imperfect because each company has a different number of shares outstanding, but the broad comparison is unavoidable.
Delta and United have enough margin to absorb a fuel shock and remain solidly profitable. American does not.
One analyst stated the issue rather bluntly during the call:
“The number one question we hear from investors is why isn’t the low-margin producer cutting capacity? Why isn’t there a greater sense of urgency?”
Isom responded that American was matching capacity to demand and had already reduced its third-quarter capacity plan. That is reasonable, but it does not fully address the underlying concern.
The fuel shock exposed just how little room American has for error.
Interest Expenses Also High (Don’t Just Blame Fuel)
American produced $446 million in operating income during the quarter.
Then it paid $409 million in net interest expense.
Almost the entire operating profit was consumed by interest before taxes and other nonoperating items were considered (makes you wonder about U.S. debt as well as Treasury yields continue to push up…).
American ended the quarter with approximately $28.9 billion in long-term debt and current maturities of long-term debt and finance leases. The airline has made progress in reducing debt since the pandemic and deserves credit for addressing upcoming maturities, but the balance sheet remains a major competitive disadvantage.
Delta and United are not debt-free, but American’s interest burden leaves it especially exposed when fuel rises or demand weakens.
This is why American cannot simply point to fuel and declare the quarter a success.
Fuel explains why profit declined so sharply. Debt helps explain why so little remained.
There Is Real Progress At American Airlines
I do not want to dismiss what American has accomplished.
The airline is finally making investments I have wanted to see for years:
- Premium capacity is growing nearly twice as quickly as Main Cabin capacity
- New Boeing 787-9 and Airbus A321XLR aircraft are adding better premium seats
- The Boeing 777, Airbus A319, and Airbus A320 fleets are being retrofitted
- Managed corporate revenue rose 26%
- AAdvantage enrollment increased more than 30%
- Customer satisfaction scores improved
- The new bank structure at Dallas-Fort Worth reduced misconnects by nearly 25% according to AA
- American says DFW unit revenue outperformed the system average by four points
I have noticed the changes as a passenger.
The new 787-9 is excellent. Food and beverage improvements are visible. Lounges are getting better. Complimentary Wi-Fi is a godsend on domestic flights and Starlink is coming. American is showing an attention to its onboard product that was missing for far too long. I have nothing but praise for that: the strategy of competing for premium and corporate customers is the right one.
American’s previous attempt to become a larger version of a low-cost carrier while alienating the travel agencies that delivered its most valuable customers was a disastrous detour. The airline is now reversing that damage, and the revenue numbers demonstrate that customers are returning.
Isom said:
“While there’s much more work to do, we’re seeing tangible signs of progress, and we remain confident in our ability to close the revenue gap over time.”
I agree that there is progress.
But American must eventually turn that progress into profit and it seems to be moving in the wrong direction.
American Has The “Most Upside” Because It Remains So Far Behind?
Management repeatedly described American as the airline with the “most upside.”
That is a clever way to frame the situation.
American does have tremendous upside, but largely because its margins remain so far behind Delta and United.
Isom explained:
“We believe American remains the carrier with the most upside.”
Maybe?
American has valuable hubs, the country’s best Latin America network, a powerful credit card and loyalty program, a huge domestic footprint, strong partners, and an increasingly competitive premium product.
But “upside” is potential when investors are looking for performance.
The market is not going to reward American simply because its revenue gap is narrowing. Investors, employees, and particularly pilots looking at profit-sharing checks from competing airlines want to see sustainable earnings.
American’s pilots union has already expressed deep frustration with management and openly entertained alternative paths for the company. A quarter in which American generates record revenue but earns only $71 million will not quiet those critics, especially when AA expects to lose money now for the full fiscal year.
CONCLUSION
American Airlines delivered its strongest revenue quarter ever, with impressive growth in premium, corporate, domestic, and international demand.
The commercial turnaround is working. But the financial result remains deeply unsatisfying: $16.7 billion in revenue produced only $71 million in net income, while an 83% increase in fuel expense and a $409 million quarterly interest bill consumed almost everything else.
Fuel volatility is not American’s fault. Its thin margin and heavy debt burden are still American’s problem.
I am encouraged by the product investments and the return of corporate travelers. American is moving in the right direction, and as a passenger, I can see and appreciate the effort.
But record revenue is not enough. Until American can convert that revenue into margins remotely comparable to Delta and United, the airline will remain the U.S. legacy carrier with the “most upside” and the most left to prove.
Have we considered that ‘profit’ for shareholders isn’t everything? Also, is it possible they’ve artificially lowered ‘profit’ to avoid ‘profit-sharing’ with workers (and the somewhat related silo-ing of frequent flyer programs and wholly-owned subsidiaries, like the various regionals)? Finally, how’s the whole ‘credit cards with wings’ thing working out? (Apparently well, for Amex/Delta, at least). Anyhoo, more broadly, the market is irrational, especially right now.
Before Tim Dunn makes this comment section all about Delta, I’d like to just say I hate flying AA, but I’m rooting for them to turn it around. They need to stop outfitting their domestic planes like Spirit. For god sakes, put some extra legroom seats in economy!
I have a 5 hour flight on AA this winter that was booked as part of a group and as someone at above average height I’m already dreading being wedged in their tiny seat for that long.
Well in capitalism, a publicly traded company is responsible to its shareholders, so yeah profit is kind of a thing unless a majority of shareholders somehow decide to lose their minds. Institutional investors like public sector retirement funds own millions of shares in this airline…so they kind of need it to not suck donkey taint.
Billy Bob,
since this topic has been discussed on other sites, I will simply add here what I said elsewhere which is that AA and DL generated nearly identical amounts of domestic revenue but the way both did it is far different.
AA operates more flights on its domestic system on RJs – even though they are largely 76 seaters – than mainline while DL operates the hghest percentage of its network on mainline aircraft of any of the 4 US airlines that use RJs – AA, AS, DL and UA.
DL has the highest average aircraft size including RJs while AA has the lowest.
AA simply is simply much less efficient in generating revenue compared to DL and is worse than UA.
This is a structural problem as a result of the wrong fleet mix which is itself “necessary” because AA is overhubbed in the eastern US so AA is not going to fix that problem for a long time.
and thus their domestic profitability is not likely to improve
they also lose money flying the Atlantic and Pacific and have done so for years.
Their Latin profits are slightly more than their Atlantic and TPAC losses but their entire international operation is barely profitable.