A sudden and steep climb in jet fuel prices is throwing U.S. airline earnings forecasts into disarray, revealing just how quickly rising fuel costs can overtake the benefits of strong passenger demand.
American Airlines had been on track to raise its 2026 earnings forecast earlier this month. But within just 13 days, after its anticipated fuel bill for the remainder of the year climbed by nearly $1.6 billion, the carrier reversed course and cut its outlook instead.
The dramatic turnaround highlights a core tension in the airline business: fuel prices can shift dramatically within days, but fare hikes take weeks or even months to make an impact because they only apply to tickets that haven’t been purchased yet.
While robust travel demand and limited seat capacity have given airlines the ability to charge more without scaring away customers, higher fares have only made up for a portion of the ballooning fuel expenses.
As the U.S.-Iran ceasefire showed signs of breaking down, jet fuel spot prices surged nearly 30% between July 2 and July 22, casting a shadow over the industry’s financial outlook.
“I think margins are going to be effectively down for the industry,” American’s Chief Financial Officer Devon May told Reuters. “If we had guided on the same day as Delta (July 10), we’d have been guiding up for the year.”
May noted that in early July, American had anticipated full-year pretax earnings of nearly $1.5 billion — roughly four times its 2025 result. That projection has since been replaced by a revised forecast ranging from a potential loss to a modest profit, with breakeven sitting at the midpoint.
The situation is especially precarious for American, whose thinner profit margins and persistent earnings gap compared to Delta Air Lines and United Airlines give it less financial cushion to weather rising fuel costs. That puts added pressure on CEO Robert Isom’s ongoing efforts to rebuild corporate travel business, expand premium seating, and grow revenue from the airline’s loyalty program.
American issued the reduced forecast even as it reported record quarterly revenue and projected solid unit revenue growth in the second half of the year. If fuel prices stay elevated, the airline could face slower debt repayment, tighter investment budgets, and pressure to cut less-profitable routes.
Not all airlines have responded to the fuel surge in the same way, partly because their forecasts were based on fuel price data from different points in time.
Delta, which was the first major carrier to release quarterly results, held its annual earnings outlook steady. United raised the lower end of its forecast last week. But this week, Southwest Airlines trimmed the bottom of its outlook, and Alaska Air chose not to reinstate full-year guidance.
The varying forecasts were built on fuel price assumptions from dates ranging from July 2 for Delta to July 21 for American. During that span, jet fuel spot prices increased by 78 cents, reaching $3.59 per gallon — making it difficult to compare outlooks issued just days apart and shortening how long those projections remain relevant.
When it comes to recovering fuel costs through higher fares, airlines have had mixed results. American said higher ticket prices offset nearly half of a $2.2 billion year-over-year rise in second-quarter fuel expenses. Delta recovered about 60% of its fuel cost increase, while United recovered roughly 50%. Alaska said it recovered very little, and Southwest did not provide a comparable figure.
The ongoing fuel price surge is now testing how fast carriers can recoup those added costs. May said American’s projected fuel bill for the rest of the year rose by roughly $550 million in just the past week alone.
He added that every one-cent increase in American’s average fuel price adds approximately $46 million to its annual costs — meaning a 10-cent increase would translate to roughly $460 million in added expense.
United described a similarly jarring last-minute shift in its financial picture.
“At this time last week, I was planning to tell you that we had a good line of sight to growing earnings year-over-year,” United’s Chief Executive Scott Kirby said during the airline’s July 16 earnings call. “But fuel has gone up a lot in the last week.”
United said the rise in fuel prices since July 1 added $575 million to its anticipated third-quarter fuel costs, and the airline said it would begin basing guidance on the most current available fuel prices going forward.
At Alaska, bookings for September and October remained as strong as summer travel, but the airline’s earnings outlook stayed highly sensitive to where fuel prices land.
“You’ve got to choose a fuel price,” said Ryan St. John, Alaska’s vice president of finance, planning and investor relations. “You can guess at whatever you think fuel is, but the reality is none of us know.”
St. John noted that a 25-cent swing in Alaska’s average fuel cost could shift quarterly earnings by about 50 cents per share.
American’s May said the airline is working to pass along as much of any fuel cost increase as possible to customers, but how much it can recover remains an open question.
“It depends on the day for spot prices,” he said.
