On January 21, 2025, American Airlines Group Inc. (AAL) stock hit a six-month high of $18.67, fueled by investor optimism following an upgrade from B of A Securities, which raised its price target from $12 to $20. This bullish sentiment came at a time when the airline industry was showing signs of post-pandemic recovery, and demand appeared strong heading into the spring travel season.
However, the rally proved short-lived.
Since that January peak, AAL has experienced a steep 26% decline, closing at $9.46 on April 17, 2025. While some of this can be attributed to broader macroeconomic uncertainty—such as inflation, interest rate volatility, and geopolitical instability—one major pressure point stands out: fuel prices.
Fuel Prices: A Major Cost Driver for Airlines
To explore this, we looked at Crude Oil Futures, which serve as a proxy for jet fuel costs. Over the past six months, crude oil peaked at $80.04 before collapsing to $64.45, with a dramatic 8.8% drop just before April 17. Notably, this plunge followed a short-lived rally in early 2025.
The inverse relationship between crude oil and airline stocks isn’t always perfect, but historically, lower oil prices reduce operating costs for airlines, potentially boosting margins. However, the current drop in oil hasn’t yet translated into a rebound for AAL stock.
Why the Disconnect?
Despite the decline in crude oil, airline stocks like AAL remain under pressure. Here’s why:
- Lag in Operational Impact: Airlines often hedge fuel costs months in advance. The recent drop in crude might not immediately affect Q1/Q2 earnings.
- Broader Market Sentiment: Investors are risk-off right now, especially with concerns around softening travel demand and rising labor costs.
- Debt Load & Earnings Pressure: AAL continues to carry significant post-pandemic debt. With earnings in 6 days, the market is cautious.
NPPSC Outlook: What’s Next?
If crude oil stabilizes below $65, AAL could see improved sentiment—especially if earnings show signs of cost improvement or revenue growth. Conversely, a rebound in oil prices, especially driven by geopolitical tensions or OPEC cuts, would renew pressure on airline margins.
Investors watching AAL should keep an eye on:
- Fuel price trends over the next quarter.
- Earnings results (due in 6 days).
- Guidance on summer travel demand.
AAL is in a transitional moment—caught between the benefits of lower oil prices and the burdens of macroeconomic headwinds. Whether it regains momentum will depend not only on crude oil, but also on its ability to convince investors of a profitable path forward.