Jet Fuel Is Up 84% in a Year. American, United and Southwest Are Cutting Flights. Delta Owns a Refinery.
- US Gulf Coast jet fuel averaged $3.724 a gallon in August 2026, up from $3.042 in June and 84% above August 2025's $2.024.
- The global average jet fuel price reached $181.46 a barrel on September 17, up 6.1% in a week and about 19% above IATA's 2026 forecast of $152.
- On September 16, American, United and Southwest told investors they are trimming capacity. Southwest cut 2026 capacity growth to about 1.5% from 2%-3%.
- American's full-year outlook is now an adjusted loss of $0.65 to a profit of $0.65 per share. Delta kept its $6.50-$7.50 EPS guidance; United projects nearly $6 billion in extra 2026 fuel costs.
- Through Sept. 16, American stock was down about 14%, United about 15% and Southwest about 11%.
Fuel is an airline's second-biggest cost
After labour, fuel is usually an airline's largest expense. In a normal year it's a quarter to a third of costs. In 2026 it's become the whole story.
US Gulf Coast jet fuel averaged $3.72 a gallon in August, up 84% from a year earlier. On September 17, the global average hit $181.46 a barrel, about 19% above what the airline industry's trade group, IATA, had forecast for the year.
Why jet fuel rose faster than oil
Oil has risen sharply this year because of the Iran conflict and disruption around the Strait of Hormuz. Jet fuel has risen roughly twice as fast.
The reason is the crack spread, the gap between the price of crude oil and the fuels refined from it. When refineries can't keep up with demand for diesel and jet fuel, that gap widens. Deutsche Bank estimates every 1 cent per gallon costs the US airline industry about $200 million a year.
It's the same force driving refiners' profits higher. See Why US Refiners Are Rallying in 2026.
What airlines announced on September 16
At an industry investor conference, the big carriers laid out their responses:
- American Airlines: about $1 billion in extra fourth-quarter fuel costs versus July assumptions, and schedule cuts late in Q4. Its full-year outlook is now an adjusted loss of $0.65 to a profit of $0.65 per share, after two cuts since the summer.
- United Airlines: eliminating some December flights and considering cuts in early 2027 if fuel stays high. It still said Q4 bookings "remain very strong." United projects nearly $6 billion in extra fuel costs for 2026 but earlier raised its EPS guidance to $9 to $11.
- Southwest Airlines: 2026 capacity growth cut to about 1.5%, from 2%-3%.
- Delta Air Lines: no new cuts. It kept its full-year guidance of $6.50 to $7.50 per share and $3 billion to $4 billion in free cash flow.
Why Delta is different: the refinery
In 2012, Delta bought an oil refinery in Trainer, Pennsylvania, through a subsidiary called Monroe Energy. Wall Street laughed at the time.
Today it looks smart. When the crack spread widens, the refinery earns more, which offsets part of Delta's higher fuel bill. In 2022, the last big fuel spike, the refinery helped save Delta an estimated $785 million. It's a built-in hedge that American, United and Southwest don't have.
It isn't a perfect shield. Delta still buys most of its fuel at market prices. But it's a big reason Delta held its guidance while others cut.
Why airlines don't just hedge
Most large US airlines stopped traditional fuel hedging in recent years. Hedging costs money every year, and several airlines lost billions when oil prices fell after they had locked in high prices. The trade-off: when fuel spikes, the hit to earnings is immediate and total.
How to judge an airline stock in a fuel shock
- Balance sheet. Airlines with heavy debt have less room to absorb losses. American carries far more debt than Delta or Southwest.
- Pricing power. Airlines with loyal premium and business travellers can raise fares more easily. United and Delta lead here.
- Capacity discipline. Cutting unprofitable flights protects margins. Watch whether cuts spread across the industry, which supports fares.
- Fuel sensitivity. Check the "fuel sensitivity" line in each airline's investor presentation: how much each 10-cent change per gallon moves annual costs.
- Budget carriers are most exposed. Low-cost airlines have thin margins and less pricing power.
Canadian investors: Air Canada faces the same fuel pressures. Jet fuel is priced in US dollars, so a weaker loonie makes it even more expensive for Canadian carriers.
The honest uncertainty
Airline stocks are a leveraged bet on fuel prices. Oil fell more than 2% on September 25 on hopes of a US-Iran deal. If the Strait of Hormuz reopens, jet fuel could drop quickly and airlines could rally hard. If the conflict drags on into the winter, more cuts are likely. Either way, expect big moves, and size any position accordingly.
Frequently asked questions
Why is jet fuel rising faster than oil?
Jet fuel is made from crude oil in refineries. When refining capacity is tight, the gap between the price of crude and the price of refined fuels, called the crack spread, widens. In 2026 the Iran conflict disrupted both crude supplies and refined-product flows, so jet fuel roughly doubled while crude rose far less.
Why does Delta own a refinery?
Delta bought the Trainer refinery near Philadelphia in 2012 through its subsidiary Monroe Energy. When jet fuel prices rise faster than crude, the refinery earns more, offsetting part of Delta's higher fuel bill. It works as a natural hedge that other US airlines don't have.
Do airlines hedge fuel?
Most large US airlines stopped traditional fuel hedging in recent years, judging it too expensive and unpredictable. That leaves them fully exposed to price spikes, which is why fuel moves hit their earnings so directly in 2026.
Are airline stocks a good buy when fuel prices are high?
Airline stocks are among the most volatile in the market. They can rebound sharply if fuel prices fall, for example on a US-Iran diplomatic deal, but they can fall further if prices keep rising. Airlines with strong balance sheets, pricing power and low debt tend to survive fuel shocks best. RiskStock doesn't give personal investment advice.
Primary sources
Data & disclaimer: This article is for educational purposes only and is not financial or investment advice. Figures reflect data available as of Sep 26, 2026, and conditions change — always confirm current pricing, rates and rules with the provider before you act. Written by Elizabeta Dimoska. See our editorial standards and disclosure.
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