American Airlines Group (NASDAQ:AAL) reported third-quarter revenue growth of 19.3% from a year earlier to $16.3 billion, exceeding the high end of its guidance range, but said a sharp increase in fuel costs drove an adjusted loss of $0.28 per diluted share.
Chief Executive Officer Robert Isom said fuel expense increased by $1.9 billion year over year during the quarter as the carrier paid an average of $3.85 per gallon, or $1.48 more per gallon than in the same period last year. He said the airline would have been “solidly profitable” without the fuel-price spike, while acknowledging that American was not satisfied with posting a loss.
“Our job now is to convert all this progress into better margins, free cash flow, and an even stronger balance sheet,” Isom said. The company said it expects the benefits of its strategy and investments to become more apparent as fuel prices stabilize.
Revenue Strength Across Domestic and International Markets
Chief Commercial Officer Nat Pieper said total unit revenue increased 14.5% year over year in the third quarter, supported by growth across all geographies and cabin classes. Domestic passenger unit revenue rose 13.6%, with notable performance in New York and Miami, while international passenger unit revenue increased 16.4%.
- Latin America passenger unit revenue rose 21.1%.
- Atlantic passenger unit revenue increased 14.5%.
- Pacific passenger unit revenue grew 11.3%.
- Premium unit revenue climbed 18.5%, exceeding main-cabin unit revenue growth by more than four percentage points.
Pieper said the airline deliberately prioritized yield over load factor during the quarter, accepting slightly lower load factors in exchange for higher yields. He said premium products, pricing, merchandising and loyalty initiatives offer further opportunities to improve revenue quality.
Premium seating accounts for roughly half of American’s ticket revenue despite representing about 30% of seats, according to Isom. The company is adding premium seats through new aircraft deliveries and retrofit programs affecting more than 200 Boeing 777, Airbus A320 and Airbus A319 aircraft over the next three years.
Managed corporate revenue increased 28% year over year, marking the sixth consecutive quarter of double-digit growth, Pieper said. He also cited a 27% increase in travel-management-company channel sales and a 46% increase in the carrier’s AAdvantage Business small- and medium-business program.
Fourth-Quarter Outlook Includes Higher Revenue and Fuel Headwinds
American forecast fourth-quarter revenue growth of 19.5% to 22.5% year over year. However, Chief Financial Officer Devon May said fuel is expected to remain a significant headwind, with the company projecting an average fourth-quarter fuel price of about $4.70 per gallon based on the forward curve as of Oct. 19.
At that price, American expects fourth-quarter fuel expense to rise about $2.8 billion from a year earlier. The carrier forecast a fourth-quarter adjusted loss of between $0.50 and $1.10 per diluted share and a full-year adjusted loss of between $1.00 and $1.60 per diluted share.
May said third-quarter cost per available seat mile excluding fuel and special items, or CASM ex, increased about 3% year over year, better than the midpoint of the company’s prior guidance. American expects fourth-quarter CASM ex growth of 2.5% to 3.5%.
The company expects fuel expense for the full year to be more than $7 billion above 2025 levels. May said American has met or beaten its CASM ex guidance in 14 of the past 15 quarters and expects nearly $1 billion in annual run-rate savings by year-end from technology, procurement and process-improvement initiatives. It also expects more than $900 million in working-capital improvements.
Capacity Growth Set to Slow in 2027
Management said American’s capacity growth will decelerate considerably in 2027 as it responds to elevated fuel costs and focuses on matching capacity to demand. Isom said the company’s 2026 growth was primarily intended to rebuild and strengthen its network after it had undergrown competitors since the pandemic.
He said the carrier could reduce aircraft utilization and use that time to support retrofit work and Starlink installations. American plans to install Starlink connectivity across its mainline fleet and is adding seatback entertainment on narrow-body aircraft.
May said slower growth would create some upward pressure on unit costs. Historically, the company has expected low-single-digit CASM ex growth when capacity expands at a mid-single-digit rate, he said.
The airline highlighted network investments at Dallas Fort Worth, Miami, Phoenix, Charlotte, Chicago, Philadelphia and Los Angeles. Pieper said the Dallas Fort Worth rebanking produced record passenger volumes, fewer missed connections and mishandled bags, and unit revenue that outpaced the rest of the system.
For 2027, American plans seven new long-haul international routes, including Chicago to Tokyo and Charlotte to Barcelona. Cargo revenue increased 29% in the third quarter, and Pieper said the company sees further cargo opportunities as it expands its wide-body fleet.
Fleet, Liquidity and Loyalty Initiatives
American expects to take delivery of 47 new aircraft in 2026 and projects capital expenditures of $4 billion to $4.5 billion. The company said it is nearing completion of a wide-body aircraft order campaign intended to replace its Boeing 777-200 fleet over the next decade, though management did not provide details on aircraft manufacturers or order structure.
At the end of the third quarter, American had $11.8 billion of total available liquidity and more than $26 billion of unencumbered assets in first-lien capacity. The company expects to end the year with net debt of approximately $30.5 billion, flat with the level at the end of 2025.
May said American has reduced total debt to roughly $36 billion from $54 billion during the pandemic. He said improved earnings and margins, rather than financial transactions, are the primary path toward improved leverage and credit metrics.
On loyalty, AAdvantage enrollments increased 27% year over year in the third quarter, while spending on Citi co-branded cards rose nearly 10%. American also introduced a cash-and-miles booking option during the quarter, which Pieper said has produced encouraging early results.
About American Airlines Group (NASDAQ:AAL)
American Airlines Group Inc is a holding company whose principal subsidiary, American Airlines, provides scheduled passenger air transportation and air cargo services. The company operates a large mainline network under the American Airlines brand and offers regional service through carriers operating as American Eagle. Its services include domestic and international flights, connecting passengers through a network of hubs and focus cities.
American Airlines serves destinations throughout the United States, as well as markets in Canada, Mexico, the Caribbean, Central and South America, Europe, Asia and other international regions.
