US Airlines: Update on Fuel Shock / RV

US Airlines Fuel Shock

US Airlines: Update on Fuel Shock / RV

Matt Woodruff, CFA: Head of Aerospace & Defense / Transports - CreditSights

9 March 2026

Download the Full Report to gain insights on:
  • How Iran war tensions drove Gulf Coast jet fuel spot prices to $4.30/gal, a 102% YoY surge, with uneven impacts across US airlines.
  • What 2026 EBITDA forecasts reveal about diverging credit risk, from ~7% declines to ~46% drops.
  • Why the retreat from fuel hedging has left airlines more exposed to Middle East volatility despite expectations of domestic supply stability.
  • Which carriers face elevated liquidity pressure and potential financing needs exceeding $1bn under current forward fuel curves.
  • Where forward pricing signals relief, with jet fuel falling from ~$3.30/gal in 2Q26 to ~$2.41/gal in 4Q26 if Hormuz security normalizes.

Executive Summary

  • Spot Gulf Coast jet fuel surged to $4.30/gal on Thursday (+102% YoY) before easing to $3.82 on Friday, while the forward curve now implies $3.30 average in 2Q26, declining to $2.73 in 3Q and $2.41 in 4Q amid uncertainty around the Strait of Hormuz.

  • U.S. airlines have largely moved away from fuel hedging given historically uneven economics and a post-shale view that greater domestic supply—and the prospect of “peak oil” demand over the next decade-plus—would structurally temper oil price risk, a stance now being tested by Middle East-driven volatility.

  • Using the current forward fuel curve, we updated 2026 EBITDA expectations across our coverage, with Delta down ~7% YoY aided by its owned refinery, Southwest still improving YoY on revenue/profit initiatives, and United down ~24% YoY with investment grade progress viewed as delayed rather than derailed.

  • American screens as the most pressured large-cap carrier in our work, with EBITDA down ~46% YoY, leverage rising to ~12.3x (from 6.7x adjusted last year), and ~$1.5bn of cash burn likely requiring incremental actions alongside potential first-lien issuance capacity of ~$13bn.

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