Major U.S. airlines American Airlines and United Airlines reported better-than-expected first-quarter earnings but issued stark warnings about soaring fuel costs driven by the ongoing Iran conflict. The rising expenses are prompting capacity cuts and predictions of significant fare increases, potentially impacting consumer travel demand and broader economic trends.
American Airlines posted a Q1 adjusted loss of 40 cents per share, beating the 47-cent loss estimate, with record revenue of $13.91 billion, up 10.8% year-over-year. However, the company flagged a more than $4 billion increase in fuel-related expenses for the full year, with average fuel costs per gallon expected to surge from $2.75 in Q1 to $4 per gallon. Despite this, its full-year guidance range of -$0.40 to +$1.10 per share topped analyst expectations of a -$0.65 loss.
United Airlines also beat Q1 estimates, with revenue up 10.5% to $14.61 billion and EPS of $1.19 versus $1.08 expected. However, management warned fares may need to rise 15-20% to offset fuel costs and announced capacity cuts. CEO Scott Kirby stress-tested a scenario where oil hits $175 per barrel, estimating up to $11 billion in additional annual fuel costs. Full-year EPS guidance was slashed from a previous $12-$14 range down to $7-$11.
Both airlines emphasized strong demand but face a challenging environment as fuel costs escalate due to geopolitical tensions. United expects to pass through only 40-50% of fuel costs in Q2, improving to 85-100% by Q4. The U.S. Global Jets ETF has fallen 7.8% so far in 2026, reflecting sector-wide pressure.
