Shorting American Airlines – Update

Just providing a short update since my Monday post. Skip to the timeline for the super condensed version.

AAL dipped and rebounded alongside JETS and other North American airline stocks. New liquidity has emerged on the options chain – I added a few new strikes to my positions this week (at the bottom). Probably not adding anything else today because maybe this latest proposal from Iran is for reals the one that ends the war. It almost certainly won't be, and even if it is it's going to take a very long time for energy markets to normalize…but if everything soars on the news anyway there will be other opportunities to profit.

I’m not quite doubling down, but I may continue adding cheap puts on new information. To be clear, this is a thesis built around the idea that American Airlines' recent earnings set themselves up for an especially sharp guidance miss and that they are likely to be punished harder than their peers when Q2 drops.

AAL announced closure of a $1.14 billion round of funding the same day I published.

Air Canada announced Q1 results on April 30. They suspended full-year 2026 guidance because of the unpredictability of fuel prices.This is notable: They are the only airline with financial hedges on fuel and theoretically the most insulated (aside from Delta’s Monroe refinery advantages) to elevated prices but still suspended full-year guidance. The TLDR, and feel free to check my numbers: Air Canada’s Q2 estimate for fuel is $4.16 per gallon if you remove their hedge, and they cannot provide guidance beyond Q2 because of fuel price uncertainties.

I missed this, but Southwest Airlines reported Q1 on April 22, the day before AAL. Their unhedged fuel estimate: $4.10 to $4.15 per gallon. Notably, Southwest declined to reaffirm full-year guidance, stating: “Given the ongoing macroeconomic uncertainty, updating the Company's full-year adjusted EPS guidance of $4.00 would not be productive at this time. Achieving this outcome would require lower fuel prices and/or stronger revenue performance to offset higher fuel expense.”

So here’s the current timeline of events:

April 8 – Delta reports Q1. Guides $4.30 / gallon Q2 including $300 million from their Monroe refinery. Cites fuel uncertainties but makes no change to full-year guidance.

April 22 – United reports Q1. Guides $4.30 / gallon with zero hedging, same structure as AAL. Cuts full-year EPS from $12-14 to $7-11.

April 22 – Southwest reports Q1. Guides $4.10 – $4.15 / gallon with zero hedging, declines to reaffirm full-year guidance, implies it’s a longshot at best.

April 23 – American Airlines reports Q1. Guides $4 / gallon with zero hedging, notes that full-year guidance will be “flat” relative to 2025 “despite $4 billion in increased fuel costs.” Again, that $4 billion is enormously optimistic and they’re the only ones attempting to project fuel costs through EOY 2026.

April 24 – American Airlines closes a $1.14 billion round of funding a day after the sunniest Q1 in the industry.

April 30 – Air Canada reports Q1. Hedges fuel, so somewhat insulated. Unhedged fuel estimate for Q2: at $4.16 / gallon, pulls full-year guidance completely because of fuel unpredictability.

May 1 – Average spot price for jet fuel in April: $4.29. (AAL’s actual reported average fuel cost for 2025 comes pretty close to this website; no guarantees, but this is a useful placeholder)

Positions:

1. (New) $11 puts, 8/21/2026
2. $5 lottery ticket puts, 1/15/2027
3. (New) $8 puts, 1/15/2027
4. $10 puts, 1/15/2027