Impact of Rising Fuel Prices on Airlines

Recently, executives from major airlines, including American Airlines, United Airlines, and Southwest Airlines, shared insights on how escalating jet fuel costs are affecting flight schedules and airline capacity. In fact, they’re closely monitoring these factors as jet fuel prices continue to climb.

The International Air Transport Association (IATA) reported a week-over-week increase of 6.1% in the global average jet fuel price, bringing it to $181.46 per barrel last week. This rise is significant and has caught the attention of airline officials.

During the Morgan Stanley 14th Annual Laguna Conference, American Airlines’ Chief Financial Officer, Devon May, noted that the company’s jet fuel costs in the fourth quarter are now expected to be roughly $1 per gallon higher than their July projections, which adds about $1 billion to their total fuel expenses. “Overall for the third quarter, we feel great,” he said, though he acknowledged the surge in fuel prices has been a concern. “In the last four weeks, fuel’s run up probably $1 a gallon for the fourth quarter alone.”

Moving forward, May indicated that American Airlines intends to modify its capacity further in the fourth quarter as a response to the ongoing higher fuel costs.

American Airlines CEO, Robert Isom, mentioned that the airline still anticipates third-quarter revenue to increase by 16% to 19% from the same period last year, thanks to a robust performance in both domestic and international markets, covering both premium and economy seating.

When discussing fuel expenses, Isom stated, “When you take into account fuel right now, yes, we’ve absolutely done a great job of recapturing a tremendous amount of that expense.”

Meanwhile, United Airlines CFO, Michael Leskinen, warned that plans for some December flights are being reconsidered due to these rising fuel prices. He remarked, “As you look into the fourth quarter, there’ll be some flights in December that we won’t fly that we thought we were going to fly.” He further clarified that if fuel prices stay high, it might affect their scheduling into early 2027.

Leskinen did, however, reinforce that fourth-quarter bookings at United are looking strong, encompassing premium, corporate, and economy travel. He expressed confidence, stating, “Bookings have continued as we expected, so that piece of the equation is resilient — very little evidence of demand destruction.”

Southwest Airlines CFO, Tom Doxey, noted that due to escalating fuel prices, the airline has already reduced about half of its anticipated year-over-year capacity growth for 2026. “If fuel is higher for longer,” he commented, “trimming capacity would be the natural response.”

Despite this, a spokesperson for Southwest Airlines clarified that adjustments made up until now have been minimal, and Doxey was merely illustrating a potential outcome should the high fuel prices persist.

Interestingly, Doxey also mentioned that unexpectedly strong fall bookings have helped lessen the impact of higher fuel costs, allowing the airline to maintain its earnings outlook for the third quarter.

As the airline industry navigates these challenges, spokespeople for both American and United Airlines shared they had no additional comments to offer at this time.