Southwest and American Airlines Face a Jet Fuel Test as Earnings Arrive
Brent crude topping $110 a barrel just days before earnings puts Southwest and American Airlines in a familiar bind: strong passenger demand on one side and surging fuel bills on the other. Something has to give, and this week's results…
Southwest Airlines (NYSE:LUV | LUV Price Prediction) reports third-quarter results after the close today. American Airlines (NASDAQ:AAL) follows before Thursday’s open. Jet fuel costs are the key challenge both carriers share. On October 19, Bloomberg Businessweek noted that Brent futures had reached $110 a barrel for the first time since May.
Revenue Growth Ran Into Higher Fuel Bills
American Airlines reported that second-quarter revenue grew more than 16%, “exceeding our initial expectations.” Over the same period, fuel expense rose 83.3% to $4.88 billion and operating margin narrowed to 2.7% from 7.9%.
Southwest Airlines said it posted results “well ahead of consensus expectations despite nearly $900 million of additional fuel expense year-over-year.” Adjusted EPS of $0.94 beat the $0.52 consensus.
Sentiment has cooled since July. American shares trade at $12.07, down 21.27% this year. Southwest trades at $39.55, down 3.02% year to date. Analysts have cut its third-quarter EPS estimate to $0.5715 from $0.7981 90 days ago.
Analysts Expect Revenue Growth Near 18% at Both Carriers
| Metric | Southwest | American |
|---|---|---|
| Q3 EPS consensus | $0.5715 | ($0.3343) |
| Q3 2025 EPS | $0.11 | ($0.17) |
| EPS change YoY | +419.5% | Larger loss |
| Q3 revenue consensus | $8.24 billion | $16.20 billion |
| Revenue growth YoY | 18.6% | 18.3% |
| FY2026 EPS consensus | $2.8833 | ($0.8864) |
| FY2026 EPS change | +210.0% | Swing to loss |
| FY2026 revenue consensus | $33.10 billion | $63.35 billion |
| FY2026 revenue growth | 17.9% | 16.0% |
Southwest’s New Revenue Levers Face Another Fuel Test
Southwest credited growth in “managed business, Rapid Rewards, and our Chase co-branded credit card.” A co-branded card generates revenue for the airline because the bank purchases points from it to reward cardholders. Managed business revenue rose 30%, loyalty enrollments climbed 35%, and card acquisitions increased 28%.
Southwest also said that “even in a volatile fuel environment,” it posted earnings growth and margin expansion, and that it is “positioned to do so for the remainder of 2026.” On July 7, Jim Cramer said ultra-low-cost rivals have “either gone under” or “cut a ton of capacity.” He added that Southwest “has become more disciplined” since activist Elliott Investment Management got involved.
In July, Southwest guided for third-quarter unit revenue (sales per seat flown one mile) to rise 17.5% to 19.5%.
American’s Premium Push Has to Outrun a Wide Loss Range
American Airlines said premium, Main Cabin, domestic and international revenue were “all up meaningfully,” and that it is “excited about the remainder of 2026 and what’s ahead in 2027 and beyond.” Premium cabins bring in nearly half of ticketed revenue on roughly 30% of seats.
Fuel complicates that story. In July, American Airlines guided for a third-quarter adjusted loss of $0.70 to $0.10 per share on revenue growth of 16% to 19%, with fuel expense up $1.7 billion. The full-year consensus of ($0.33) falls within its ($0.65) to $0.65 range.
Why Your Frequent Flyer Points Show Up in Earnings
In April, the host of The Clark Howard Podcast said that American “has a much more favorable redemption system than the other two full fare airlines.” On October 16, Howard said he has “been saving a ton using the points.” Members who can redeem easily keep using their co-branded cards, and the bank revenue from that spending burns no jet fuel.
What Each Airline Must Prove This Week
Southwest needs unit revenue to land inside its target range and a reaffirmed $3.25 to $4.25 full-year EPS outlook. American needs revenue strong enough to maintain its full-year guidance because analysts already expect less.
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Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.
Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community.
Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.
Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, moderating workshop sessions at regional conventions.
