American Airlines guided for $4 per gallon jet fuel in Q2 and maintained optimistic full-year guidance despite what one investor calls "enormously optimistic" assumptions. Here's why that number should set off alarm bells.
Every other major airline is guiding higher. Delta and United both guided for $4.30 per gallon. Southwest guided for $4.10-$4.15. Air Canada, which actually hedges fuel, pulled full-year guidance entirely because fuel prices are too unpredictable.
And then there's American, projecting $4 per gallon with zero hedging and claiming full-year guidance will stay "flat" despite $4 billion in increased fuel costs.
If it sounds too good to be true, that's because it probably is.
The Math Doesn't Work
As of May 1, the average spot price for jet fuel in April was $4.29 per gallon, according to industry data. American is assuming fuel will somehow get cheaper while every other airline is preparing for prices to stay elevated or go higher.
Remember, we're still dealing with Middle East instability and supply chain constraints. Oil markets aren't exactly screaming "lower prices ahead." So how is American coming up with $4 per gallon?
One Reddit investor who's been tracking this closely noted the suspicious timing: American announced a $1.14 billion capital raise the day after reporting Q1 earnings. You don't raise over a billion dollars the day after delivering "the sunniest Q1 in the industry" unless you're expecting problems ahead.
What Competitors Are Doing
United Airlines full-year EPS guidance from $12-14 down to $7-11 because of fuel uncertainty. declined to reaffirm full-year guidance, explicitly stating that hitting targets would require
