Jet fuel prices spiked 20% in July, landing in the middle of the two weeks in which U.S. carriers reported April–June earnings. United, American and Southwest all disclosed sharp jumps in fuel expense, and American now guides to a full-year result that spans a loss.
U.S. airlines had to readjust their earnings estimates for the year just days before reporting second-quarter results, after the re-escalation in the Middle East earlier this month produced a 20% spike in jet fuel prices. The two weeks the spike covered were the same weeks carriers were guiding for the third quarter and the rest of the year. Fuel matters this much because it is the carriers' second-highest expense after labor costs.
Crude swings turn guidance into guesswork
Extreme volatility in crude oil and, consequently, jet fuel has turned earnings projections into a kind of guesswork, depending on where jet fuel prices are on a given day. For five months, that has mostly depended on which oil chokepoint in the Middle East is currently closed to traffic, or on whether the U.S. Administration is trying to talk down oil prices.
United flags nearly $6 billion in added fuel expense
In the middle of July, United Airlines said it expects nearly $6 billion in added fuel expense for full-year 2026 compared with the expectation at the start of the year. Its second-quarter fuel expense jumped by $2.3 billion, or 84% year-over-year, although Q2 profit came in near the top end of guidance. During the quarter the airline also raised $3.7 billion in new liquidity in private bank transactions, which United described as low-cost insurance from geopolitical uncertainty and the possibility of an extreme spike in oil prices.
American guides to a range that spans a loss
American Airlines posted second-quarter revenue of $16.7 billion, up 16.3% year over year and the highest quarterly revenue in company history. Yet its fuel expense jumped by over $2.2 billion, or 83% from a year earlier.
Given the recent increase in the cost of fuel, the carrier now expects full-year adjusted earnings per diluted share between a loss of $0.65 and earnings of $0.65. For the third quarter it sees a loss of between $0.10 and $0.70 per share, notably down from the analyst consensus forecast of $0.61 earnings per share. On the earnings call, CFO Devon May told analysts that since the beginning of July, "expected third quarter fuel expense has increased by more than $700 million for the quarter".
Southwest beats consensus with a $1.17 EPS hit
Southwest reported consensus-beating second-quarter earnings last week despite a jump in fuel expenses by $900 million year-over-year. That higher fuel expense represented a $1.17 headwind to adjusted earnings per share, the airline said.
Source: Oilprice.com
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