Delta, American, United, Southwest All Cut Guidance - How a $6 Billion Jet Fuel Bill Is Rewriting Airline Earnings

What Happened

Over the past few weeks, all four of America's biggest network and low-cost carriers - Delta, American, United and Southwest - reported third-quarter results that landed in an oddly similar place. Revenue mostly hit record or near-record levels. Full-year profit guidance, meanwhile, moved the same direction at every single one: down. And every one of them pointed to the exact same culprit - jet fuel.

Delta reported first, on October 9. Its adjusted fuel expense jumped 62% year over year to $4.14 billion for the quarter, with the average price per gallon up 60% to $3.61. The company slashed its full-year adjusted EPS guidance to $5.10-$5.60, down sharply from the $6.50-$7.50 range it had given in July, and cut its free-cash-flow outlook to roughly $2.5 billion from $3-4 billion. Asked what was driving the revisions, Delta's CFO didn't hedge: "all of it's fuel." The company said it now expects to absorb a $6 billion increase in fuel costs for the year.

United and American followed on October 20 and 22. United posted Q3 revenue of $17.86 billion and adjusted EPS of $2.54, but fuel expense rose 61.6% year over year, and fare increases recovered only about 72% of that added cost - leaving United to guide fourth-quarter profit well below what Wall Street was modeling. American posted a record Q3 revenue of $16.335 billion and a smaller-than-feared adjusted loss of $0.28 per share (versus a forecast -$0.35), but fuel expense jumped 67.5% (a $1.9 billion increase), pushing the company to a GAAP net loss of $269 million. American's full-year guidance has now been cut three separate times this year: from a projected profit of $1.70-$2.70 per share in January, to a range of -$0.40 to +$1.10 in April, to -$0.65 to +$0.65 in July, before widening further into loss territory with the October update.

Southwest wasn't spared either. Its Q3 fuel cost came in at $3.92 per gallon, above its own $3.70-$3.75 assumption, adding $821 million in fuel expense year over year and shaving $1.08 off adjusted EPS. The airline cut its full-year adjusted EPS guidance to $2.60-$2.85, down from $3.25-$4.25 in July and roughly $4.00 originally. Southwest's actual Q3 net income still rose sharply to $270 million from $54 million a year earlier - a reminder that the carrier has been offsetting some of the fuel damage with new revenue levers like checked-bag fees and paid seat assignments, not just ticket prices.

Why Did All Four Cut Guidance at the Same Time?

The thread tying these four guidance cuts together is clear: geopolitical tension around Iran has repeatedly disrupted Middle East oil and jet fuel shipments this year, and attacks on energy infrastructure have further strained refined-fuel supply. The hit has been large enough that the International Air Transport Association cut its global 2026 airline profit forecast nearly in half, to $23 billion from an initial $41 billion estimate (2025's actual industry profit was $45 billion), and Deutsche Bank described the pressure on the industry as an "existential threat" earlier this year. The Global Jets ETF (JETS) fell more than 18% during the stretch when the fuel shock was at its worst.

What's worth understanding is why the same oil shock hit these four airlines so differently. The deciding factor is hedging - locking in future fuel prices in advance through financial contracts. An airline like Ryanair, which has roughly 80% of its fiscal 2027 fuel needs locked in around $67 a barrel, is comparatively insulated. United, by contrast, runs almost entirely unhedged, buying fuel at whatever the spot market charges - so every price spike flows straight through to the cost line. That's part of why United CEO Scott Kirby's tone shifted so visibly between August and October. In August, he said he expected fuel prices to gradually decline next year. By October 21, he was saying fuel would likely stay elevated through all of 2027, and that hitting the airline's targeted double-digit pretax margin by then would probably require at least one of three things to happen: fuel prices falling, industry-wide capacity growth slowing, or carriers continuing to prioritize higher fares over fuller planes rather than competing on volume.

There's also a timing wrinkle worth flagging. Oil prices have eased somewhat just this week - Brent crude slipped from the mid-$116 range to around $114 a barrel after Qatari mediators were dispatched to Tehran in an effort to cool tensions. But that pullback hasn't flowed through to the airlines' own forward guidance. United and Southwest are still budgeting fourth-quarter fuel at roughly $4.80 and $4.55 per gallon respectively - both well above the mid-$3 range that was normal earlier in the year. That's because airlines build their guidance off forward price curves spanning weeks to months, not off a single week's spot-price move. In other words, this week's relief rally in oil and the "structurally higher" fuel baseline airlines are actually budgeting around are operating on two different timelines - one is a market reaction to a headline, the other is a cost assumption baked into a quarter's worth of planning.

What to Take Away From This

• The same macro shock travels through different sectors in different ways. A broad oil price spike reads across the market mostly as a "risk-off" signal, but in the airline industry it shows up as a direct, line-item cost shock to the income statement. When a macro event hits, it's worth asking which sector feels it first and most mechanically - not just which one gets talked about most.
• Hedging ratio is what separates winners from losers inside the same sector. A heavily hedged carrier like Ryanair and an almost entirely unhedged one like United can report wildly different earnings impacts from the identical oil move. Before comparing commodity-exposed stocks within a sector, check each company's hedging policy - it often matters more than the headline commodity price itself.
• Record revenue and a shrinking profit outlook can coexist, and often do. Both American and United posted standout top-line numbers this quarter while their profit guidance got worse, not better. A "record revenue" headline alone can mask a cost-side problem that's actually the real story.
• A short-term price reversal and a company's forward guidance move on different clocks. Oil easing this week doesn't mean airlines will raise guidance next week. Companies set fuel assumptions off multi-month forward curves, so near-term commodity headlines and corporate guidance updates can lag each other by a meaningful stretch.

FAQ

Oil pulled back this week - will airline earnings forecasts improve soon?

Not immediately. Airlines set their actual fuel purchasing plans off forward price curves spanning weeks to months, not a single week's spot price. United and Southwest's fourth-quarter guidance already assumes $4.80 and $4.55 per gallon respectively, based on those forward curves - a brief dip in Brent crude this week doesn't automatically unwind that. A sustained multi-week decline in oil would likely need to happen before it meaningfully shows up in the next round of guidance.

Why is United more pessimistic about fuel than some other carriers?

It comes down to hedging. United runs almost entirely unhedged, meaning it buys fuel at whatever the spot market is charging at the time, so a price spike flows through to costs immediately and in full. Airlines like Ryanair, by contrast, have locked in a large share of next year's fuel needs in advance at lower prices, cushioning the impact of the same oil move.

Does this mean plane tickets are going to get more expensive?

It's a real possibility. United has said fare increases have so far offset only about 72% of its added fuel costs - meaning airlines are already absorbing some of the hit rather than passing all of it on. If elevated fuel prices persist, as United's CEO now expects through 2027, carriers have a clear incentive to push fares higher to close that remaining gap, something Kirby has already hinted at in his public comments.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the source articles. Please check the original sources directly for the most current figures.

• Delta Air cuts profit forecast as US$6 billion fuel cost surge outweighs fare gains - BNN Bloomberg
• United Airlines sees elevated fuel costs through 2027, flags margin challenges - BOE Report
• Airlines in Bear Market as Oil Poses 'Existential' Threat - Bloomberg

Related reading: Brent Crude Slips From $116 to $114 as Qatari Mediators Rush to Tehran, Report of Post-Midterm Iran Strike Plan Sends Brent to 5-Month High

⚠️ This article is for informational purposes only and does not constitute investment advice. Market conditions change constantly, so always verify the latest data before making investment decisions.