'Airfares are likely to rise': Rising jet fuel costs send airline stocks reeling
Airline stocks sank on Monday as investors priced in the impact of flight cancellations and higher jet fuel costs resulting from the Middle East conflict.
Airline stocks sold off Monday as grounded flights and a spike in crude oil prices fueled concerns about shrinking profits from higher jet fuel costs. Shares of Delta Air Lines (DAL) dropped 5% before paring losses. American Airlines (AAL) declined as much as 6%, and United Airlines (UAL) fell as much as 7%. More from Yahoo Scout What impact will higher jet fuel costs have on airlines? How are rising oil prices affecting airline stock performance? Why did airlines stop hedging against fuel price increases? How many flights have been grounded due to Middle East conflict?
Investors priced in the impact that $100-per-barrel oil will have on jet fuel costs, which account for between one-fifth to a quarter of airlines' overall costs. On Monday, oil prices surpassed $110 per barrel for the first time since 2022, as traffic in the critical Strait of Hormuz remained at a standstill as a result of the Iran war. The cost of jet fuel has risen by as much as $1.75 per gallon in recent weeks, meaning US major airlines could each face quarterly fuel costs of around $1.5 billion or more, according to GasBuddy data. "Across the three largest airlines, that could translate to nearly $5 billion in additional expenses," Patrick De Haan, GasBuddy head of petroleum analysis, said on Monday.
"Airfares are likely to rise in the months ahead, even if oil prices begin stabilizing soon," he said. On Friday, United Airlines CEO Scott Kirby said the impact of higher fuel costs on airfare would "probably start quick." Read more: What an extended war with Iran could mean for gas prices US airlines once hedged against rising fuel costs using derivatives but largely abandoned the practice because it can be costly when oil prices fall. Southwest (LUV), one of the industry's most active fuel hedgers, ended the strategy in 2025, for instance. Additionally, the Middle East conflict has already grounded more than 20,000 flights, with thousands of passengers stranded.
European air carriers Lufthansa (LHA.DE), tumbled roughly 5% on Monday, while British Airways and Aer Lingus parent company International Consolidated Airlines Group (IAG.L) slid 3%. Air France-KLM (AF.PA) also declined by 3%. US carriers were already facing prior headwinds this year as major storms cancelled thousands of flights across the country. Delta, American, and United are all down between 20% and 30% year to date. Domestic carriers Southwest, JetBlue (JBLU), and Alaska (ALK) airlines are also down as much as 30% over a one-month period. United Airlines CEO Scott Kirby said last week that the impact of higher fuel costs on airfare would "probably start quick." (Reuters/Jim Young) · Reuters / Reuters Ines Ferre is a senior business reporter for Yahoo Finance.
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