Key Highlights

● American dipped to around $12.65 in early trading.

● A rival's fuel bill rose to $4.1 billion.

● UBS cut estimates and targets for the big carriers.

● Brent settled at $104.72, US crude at $91.85.

American Airlines (NASDAQ:AAL) dipped in early trading on Friday, changing hands around $12.65, as the airline sector reacted to a weaker-than-expected report from Delta Air Lines (NYSE:DAL). American has the lowest share price of the big three US network carriers, and its stock often reacts quickly to swings in sentiment about fuel and travel demand.

The selling was modest compared with the day's biggest movers, but it reflected a clear message from Delta's results: fuel is squeezing airline profits.

What Delta told the market

Delta reported third-quarter adjusted earnings of $1.72 a share, short of consensus estimates that ranged from $1.82 to $1.92. It was Delta's first earnings miss in two years. The company also cut its full-year adjusted earnings outlook to $5.10 to $5.60 a share from $6.50 to $7.50.

The reason was fuel. Delta's third-quarter fuel bill climbed to $4.1 billion, and the airline expects about $6 billion in added fuel costs this year. For American, which carries a heavier debt load than Delta, higher operating costs can leave less room to pay down borrowings.

Analysts lower expectations

Wall Street was already trimming its numbers. UBS (NYSE:UBS) cut its 2026 and 2027 earnings estimates and price targets for Delta, United Airlines (NASDAQ:UAL) and American, and said it expects the carriers to miss third-quarter expectations, according to market data. Morgan Stanley (NYSE:MS) also lowered estimates for Delta, United, Alaska Air (NYSE:ALK) and Southwest (NYSE:LUV). Specific new figures were not detailed in the reports.

United also slipped, and an exchange-traded fund tracking airline stocks edged lower in early trade.

Energy remains the swing factor

Oil prices are the main variable for airline earnings right now. Brent crude settled at $104.72 a barrel on Friday, still above $100, while US crude finished at $91.85. Prices fell during the day after President Donald Trump said the US would not attack Iran before the November 3 midterms and announced that Russia would supply diesel. "Both sides agreed that Russia will immediately supply over 300,000 metric tons of diesel to the U.S. and global markets", he wrote on Truth Social. Prices then recovered, as Hurricane Isaias kept nearly two-thirds of Gulf of Mexico oil output shut in.

Nick Twidale, chief market strategist at ATFX Global, captured the uncertainty: "The big question for markets is whether Trump sticks to his word if Iranian attacks intensify".

Demand is holding up

There was some comfort for airline investors in Delta's comments on demand. Chief executive Ed Bastian said: "Demand remains strong, supported by consumers' growing preference for experiences and travel". Delta's own shares recovered from premarket losses to close about flat.

The broader market also rose. The S&P 500 gained 46.18 points to 7,811.54, finishing just below its record close, while the Dow added 423.31 points to 51,654.95. But high borrowing costs remain a concern for heavily indebted companies, with the 10-year Treasury yield near a 24-year high and the Federal Reserve having raised rates in September for the first time since 2023.

American's Own Results Will Show How Far Fuel Has Cut Into Profits

American's own third-quarter report will show how far fuel costs have cut into its profits and whether it adjusts its outlook. Investors will also track oil prices, the Iran situation and Hurricane Isaias. On the macro side, September consumer price data is due Wednesday, October 14, bank earnings run from October 13 to 16 and the Fed meets on October 27 to 28. Stock markets are open on Monday, October 12, but the bond market is shut for Columbus Day.