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A rapid surge in jet fuel prices is weighing on the financial outlook of major US airlines, highlighting the industry's vulnerability to rising operating costs even as passenger demand remains strong.
American Airlines has become one of the clearest examples of the pressure. Earlier this month, the carrier was preparing to raise its 2026 earnings forecast, but reversed course less than two weeks later after its projected fuel bill for the remainder of the year increased by nearly $1.6 billion.
The airline said fuel prices can rise much faster than airlines are able to increase fares, since higher ticket prices only apply to future bookings and typically take weeks or months to influence revenue.
Although strong travel demand and disciplined capacity growth have enabled carriers to raise fares, the additional revenue has only partly offset soaring fuel costs.
Jet fuel spot prices climbed almost 30% between July 2 and July 22 as the ceasefire between the United States and Iran began to weaken, adding fresh uncertainty to the aviation industry's financial outlook.
American Airlines Chief Financial Officer Devon May told Reuters that the industry is likely to face weaker profit margins if fuel prices remain elevated.
"If we had guided on the same day as Delta, we'd have been guiding up for the year," May said.
Earlier in July, American expected full-year pretax earnings to approach $1.5 billion, roughly four times its 2025 result. However, the airline has since revised its guidance to a range stretching from a loss to a profit, with break-even at the midpoint.
The revised outlook came despite American reporting record quarterly revenue and forecasting stronger unit revenue growth during the second half of the year. The airline warned that persistently high fuel prices could slow debt reduction efforts, limit investment and increase pressure to reduce less-profitable routes.
Other major US airlines have responded differently depending on when they issued their forecasts.
Delta Air Lines maintained its full-year earnings outlook, while United Airlines raised the lower end of its guidance. Southwest Airlines lowered the bottom end of its forecast, and Alaska Air declined to reinstate full-year guidance.
The differences largely reflect the fuel price assumptions used by each airline. Delta based its outlook on fuel prices from July 2, while American used prices from July 21. During that period, jet fuel spot prices rose by 78 cents to $3.59 per gallon, rapidly changing the industry's cost outlook.
American said higher fares offset nearly half of its $2.2 billion year-on-year increase in second-quarter fuel expenses. Delta recovered about 60% of its additional fuel costs, while United recovered roughly half. Alaska reported recovering only a small portion of its increased fuel bill, while Southwest did not disclose a comparable figure.
May said American's projected fuel costs for the rest of the year increased by about $550 million in just one week. According to the airline, every one-cent increase in its average fuel price adds around $46 million to annual operating costs, meaning a 10-cent increase would raise expenses by approximately $460 million.
United Airlines also cited the rapid rise in fuel prices when updating investors. Chief Executive Scott Kirby said the company had expected year-on-year earnings growth before fuel costs surged in the days leading up to its earnings announcement.
United estimated that higher fuel prices since July 1 would add about $575 million to its third-quarter fuel bill and said it has revised its guidance policy to reflect the latest available fuel prices.
Alaska Air said booking demand for September and October remains strong but acknowledged that profitability remains highly sensitive to fluctuations in fuel costs.
American said it will continue seeking to recover as much of the higher fuel expense as possible through fare increases, although the proportion it can pass on to customers will depend on future fuel price movements.
Source: Reuters
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