The short version
Four major US airlines have cut their 2026 profit forecasts this month. United, Southwest, American and one more, all blaming the same thing: jet fuel.
American's quarter shows the problem perfectly. Record revenue of $16.3 billion. A $1.9 billion rise in fuel costs. Result: an adjusted loss.
Airfares are already up more than 20% on last year, and it still isn't enough to cover the fuel bill.
For investors, the takeaway is blunt: airline shares are currently trading as a bet on the oil price. Last week proves it, as you'll see below.
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What happened last week?
Airline shares went up, up, then sharply down. Oil explains most of it.
- 🟢 Tuesday 20 Oct — crude slipped below $97. Airlines rose: United +2.3% to $97.77, American +3.9% to $12.14, Delta +2.7% to $76.67, Southwest +1.7% to $39.46.
- 🟢 Wednesday 21 Oct — United guided fourth-quarter revenue above expectations. The sector jumped: United +6.9% to $104.50, American +3.8%, Delta +3.2%, Southwest +2.6%.
- 🔴 Thursday 22 Oct — American reported. Record revenue, an adjusted loss, and a deeper full-year loss forecast of $1 to $1.60 a share. The shares fell about 4%.
- 🔴 Friday 23 Oct — crude climbed again. The relief rally unwound: American -3.9% to $12.11, Delta -3.1% to $76.78, United down around 3-4%, Southwest -0.7% to $41.75.
Four sessions. Two directions. The same input driving both.
What did the airlines actually say?
- ✈️ American: record third-quarter revenue of $16.3 billion, with a $1.9 billion increase in fuel costs pushing it to an adjusted loss. It expects another adjusted loss in the fourth quarter and will slow capacity growth in 2027. The chief executive said he has "great confidence" the company returns to profitability next year.
- ✈️ United: cut its 2026 profit outlook on rising fuel prices, while guiding fourth-quarter revenue above analyst estimates. Its chief executive said publicly that stress from higher oil prices is increasing.
- ✈️ Southwest: beat expectations but slashed its 2026 profit outlook, citing higher fuel prices.
- 🛩️ A fleet note: American and United both plan slower capacity growth, which lands on the manufacturers. Southwest flies an all-Boeing fleet, and Boeing has just had its biggest 737 certified after a six-year wait. Airlines ordering fewer planes is the other side of that story. 📊 The common thread: revenue is fine. Demand is fine. Costs are the problem.
Why does fuel hurt airlines so much?
It's one of the biggest costs in the business, and airlines can't choose not to buy it.
Three things make it brutal:
- ⛽ Scale. Fuel is typically among the two or three largest expenses an airline has, alongside labour. A $1.9 billion increase, as American reported, is larger than most airlines' entire annual profit.
- 🕐 Delay. Tickets are sold months ahead at prices set before the fuel was bought. A carrier can raise fares today, but it is still flying passengers who booked in July.
- 🪓 Thin margins. Even in good years, airlines earn single-digit margins. A cost shock of this size doesn't dent profits, it erases them.
The pass-through is real but incomplete. Airfares are up more than 20% year on year, and four carriers still cut their forecasts. That is what an industry looks like when it can raise prices and still not keep up.
How does this connect to your own bills?
It's the same barrel of oil.
The crude price driving these airline results is the same one that pushed UAE petrol to around Dh4.28 a litre, roughly 70% above February. Brent has traded above $110, and the cost of shipping oil has risen sharply too.
So one input is now showing up in three places a UAE reader can feel:
- 🚗 At the pump, every time you fill up.
- ✈️ In airfares, up more than 20% on last year.
- 🛒 In delivery and grocery prices, through diesel.
That is how a commodity becomes inflation, and why energy prices move markets far beyond the energy sector. It also explains why refining capacity matters: Dangote's Lagos refinery, the world's largest single-train plant is the clearest recent example of a country trying to control its own fuel costs rather than import them.
What could go wrong?
- 🛢️ Oil is unpredictable, and so is this trade. Airline shares rose on Tuesday and fell on Friday on crude moves, not company news. Owning them means owning an oil view whether you wanted one or not.
- 💳 Debt makes it worse for some. American carries a heavier debt load than Delta or United, which leaves it more exposed to a cost shock. Same industry, very different balance sheets.
- 📉 The sector has diverged sharply this year. Delta sits around 20% below its 52-week high, American near the bottom of a $10.09-$18.79 range. "Airlines" is not one trade.
- ⚠️ Demand could crack. So far it hasn't, revenue is at records. But fares up 20% eventually test what travellers will pay, and a weaker consumer would remove the one thing currently working.
- 📊 Forecasts have already moved once. Four carriers cut guidance this month. If fuel stays high, the next revision is not guaranteed to be upward.
AAL, UAL, DAL and LUV are examples to research, not recommendations.
What should investors take from this?
Know which variable you're actually buying.
When you buy an airline, you are mostly buying a view on fuel. When you buy an energy producer, you are buying the other side of that same view. Holding both is not diversification, it's a hedge, and it's worth knowing which one you've constructed.
Three habits:
- 🔍 Find the biggest cost line in any business you research, then ask what moves it and whether the company controls it.
- ⏱️ Check how quickly prices can pass through. Airlines sell months ahead, which is why a fuel spike hurts before fares can catch up.
- 🧺 Remember the index route: airlines sit inside broad funds and travel ETFs, so a diversified fund spreads the risk rather than concentrating it in one fuel bet.
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FAQs
Why are airline stocks falling?
Jet fuel costs. Four major US carriers cut their 2026 profit forecasts this month, including United, Southwest and American, all citing higher fuel prices. Airline shares have been moving day to day with the crude oil price: they rose on 20 October as crude slipped below $97 a barrel, and fell on 23 October as it climbed again.
Why did American Airlines lose money despite record revenue?
American reported record third-quarter revenue of $16.3 billion, but fuel costs rose $1.9 billion, pushing it to an adjusted loss. It now expects a full-year adjusted loss of $1 to $1.60 a share and will slow capacity growth in 2027.
Are airfares going up?
They already have. Airfares are up more than 20% on last year according to airline reports and federal data, and carriers are still cutting profit forecasts, which tells you fares have not risen enough to offset fuel.
Which airline stocks are most affected by fuel prices?
All of them, though balance sheets differ. American carries more debt than Delta or United, which leaves it more exposed to cost shocks. Performance has diverged widely in 2026 across the four largest US carriers.
Can I buy airline stocks from the UAE?
American (AAL), United (UAL), Delta (DAL) and Southwest (LUV) all trade on US exchanges. On Nemo.money you can invest from $1 with zero commission, with uninvested cash earning 6% AER interest, paid daily in USD. These are examples to research, not recommendations. Your capital is at risk.
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