American Airlines Group Inc. (NASDAQ: AAL) is having a rough Monday, and it's not just because of the usual airline headaches. The stock is sliding as geopolitical tensions in the Middle East push oil prices higher, adding to a pile of challenges that includes a recent capacity guidance downgrade and a rejected merger proposal. The company is now left to manage its turnaround on its own.
The broader market isn't helping either. The Nasdaq is down 0.53%, the S&P 500 has shed 0.49%, and AAL is falling faster than the Industrials sector's 1% drop. So, what's going on?
Geopolitical Conflict Hits Energy
Crude oil rose more than 3% above $86 per barrel as the U.S. and Iran exchanged direct strikes for the first time in roughly a month. U.S. forces targeted Iranian rocket launchers preparing to deploy mines in the Strait of Hormuz, while Iran claimed attacks on U.S. bases in Jordan, according to Trading Economics. When oil spikes, airlines feel it immediately, since jet fuel is one of their biggest costs.
Airlines Absorb Fuel Expenses
But here's the thing: airlines might not pass those costs on to you. "I don't think you're going to see prices go up significantly," Airlines for America CEO Chris Sununu told host Chris Stirewalt on NewsNation's "The Hill Sunday." Sununu noted carriers are "eating the cost" of expensive jet fuel. "They're not passing all the cost to the consumers. So they're staying competitive."
That's a noble strategy, but it puts pressure on margins. Bureau of Labor Statistics data showed airline fares rose 25.5% year over year in July. However, American Airlines reported its second-quarter fuel expense jumped 83.3% to $4.88 billion, with higher fares offsetting under half of the increase. So, while you're paying more for tickets, it's not nearly enough to cover the fuel bill.
Technical Analysis
From a chart perspective, AAL is still trying to stabilize after losing altitude from its mid-year highs. It's now trading 8.7% below its 20-day SMA and 14.3% below its 50-day SMA—both consistent with a market that's selling rallies. At the same time, the stock is only 4.3% below its 200-day SMA.
The moving-average structure is mixed: the 20-day SMA is below the 50-day SMA (bearish near-term), but the 50-day SMA remains above the 200-day SMA (the golden cross that occurred in June).
- Key Resistance: $13.50
- Key Support: $13.50
AAL Price Action: American Airlines Group shares were down 2.56% to $13.29 at the time of publication on Monday.
