Airlines spend lots of money on fuel; everyone knows that already. Airlines have been spending even more money on fuel this year thanks to the war in Iran, which has pushed fuel costs to, well, sky-high prices.

The only exception to this pattern was Delta Air Lines ($DAL), whose relative fuel costs (that’s what we’re calling fuel as a percentage of revenue) went from 21 percent in Q2 to 22 percent in Q3.

Then again, Delta’s relative fuel costs are also far lower than those of the other five airlines. That’s because Delta owns its own fuel refinery, which lets the airline shave its fuel costs by a few cents per gallon every quarter. So perhaps Delta’s rising pattern in Figure 1 isn’t all that significant.

Dig further into the airlines’ disclosures, however, and the plot thickens. 

Not only did the other five airlines — Alaska ($ALK), American ($AAL), JetBlue ($JBLUE), Southwest ($LUV) and United ($UAL) — all see declines in their relative fuel costs; those costs also declined in absolute dollars, even as quarterly revenue stayed essentially flat from Q2 to Q3.

Perhaps that’s because jet fuel costs soared in early Q2 and then tumbled to a recent low in July (but still way higher than pre-war costs), before climbing again in Q3 at a more moderate pace. Even today, according to a fuel cost tracker at the International Air Transport Association, jet fuel costs are still lower now than they were in April and May.

Maybe President Trump will revive military strikes against Iran this fall, and fuel costs will spike again. In that case, perhaps the Q3 decline in relative costs is an aberration rather than the start of a trend. 

On the other hand, if Trump seeks to end the conflict, maybe fuel costs will fall and what we see in Q3 is the start of something good.

What Do the Airlines Say?

We calculated all the above using our Multi-Company Search page; it took about five minutes. But the next question is where airlines expect revenue, fuel costs, and other business to go in the future.

To explore that question, we hopped over to our Disclosures & Footnotes Query page and pulled up whatever forward earnings guidance the six airlines included in their Q3 earnings releases. 

The guidance was a mixed bag, primarily because guidance is a non-GAAP metric  so each airline pretty much gets to disclose whatever it believes is useful for investors to know; deriving an apples-to-apples comparison is tricky.

For example, American said it expects Q4 revenue to be up 19 to 22 percent compared to the year-ago period, but it didn’t include any guidance on fuel costs. It did say CASM (costs per available seat mile) would likely rise 2.5 to 3.5 percent compared to the year-ago period — but also said that number excludes fuel, which kinda defeats the whole purpose here.

JetBlue, on the other hand, did include fuel costs in its Q4 guidance, estimating that number at $4.64 per gallon; but it didn’t include any guidance on total fuel costs or revenue. Phooey on them. (Revenue per available seat mile was included, however, with an estimated 18 to 22 percent increase from the year-ago period.) 

Alaska offered guidance of $4.65 to $4.85 per gallon, but said nothing on overall fuel costs or revenue. United and Southwest offered no useful guidance on either point at all. 

Delta said Q4 revenue would likely be up 20 percent. Since its Q4 revenue from one year ago was $16 billion, that implies Q4 2026 revenue of somewhere around $`19.2 billion — but Delta was silent on potential fuel costs. 

So, OK; our effort to estimate relative fuel costs in Q4 ran out of gas. But Figure 1 still does show the airline industry is at an inflection point. If you track spot costs for jet fuel from independent sources like the IATA, you could get a sense of whether relative fuel costs are likely to decline in Q4 even as airlines keep pushing higher prices. That could mean a nice gain in net income when Q4 numbers are reported early next year. 

Filed under: Flight Plans.