$11B jet fuel shock hits U.S. Airlines

Shares of major U.S. airlines have dropped sharply over the past week as jet fuel prices surged and airfares increased.

However, the turbulence appears far from over, as the biggest airlines are set to spend an extra $11 billion on jet fuel this year due to spiking energy prices amid the ongoing U.S.-Israel-Iran war, News.Az reports, citing foreign media.

The figure is based on calculations by the Financial Times after the U.S. lifted its forecast for the average price of jet fuel in 2026 to $2.67 a gallon. The revision marked a 37% jump from estimates given in the previous month.

Shares in the top four carriers, American Airlines AAL -0.63%, Delta Air Lines DAL -0.22% , United Airlines UAL -0.46%, and Southwest Airlines LUV -2.27%, resumed their downward trend during Wednesday’s pre-market trading session. This comes even as oil prices remain elevated, despite plans by the International Energy Agency to recommend that G7 countries release record emergency oil reserves to offset the supply shock.

Fuel Costs, Travel Slump to Impact Airlines’ Financials

Unlike their European counterparts, American airlines abandoned the practice of hedging against the price of jet fuel more than two decades ago. This leaves them vulnerable amid spiking energy prices, especially as fuel costs remain one of carriers’ biggest expenditures.

Already, United Airlines CEO Scott Kirby has provided insight into the impact soaring costs could have on airlines. Kirby has stated that the carrier anticipates a “meaningful” impact on first-quarter results.

With jet fuel costs rising, adding to pressure from forced flight cancellations in the Middle East, more expensive airplane tickets, and an anticipated slump in travel bookings, airline stocks could be facing their most significant pressure since the 43-day shutdown of the U.S. federal government last year.

News.Az 

By Ulviyya Salmanli