Sky-high jet fuel is pushing aviation to the verge of a correction

Log-in here if you’re already a subscriber

HEAR FROM THE AIR CURRENT

Leave this field empty if you're human:

Airlines are heading into another global crisis brought on by skyrocketing fuel prices and geopolitical tumult that only seems to be worsening.

Carriers that began the year lining up lift to meet booming travel demand are now monitoring their cash reserves as rising jet fuel costs outpace revenue growth. The strong dollar, while benefiting U.S. airlines, is penalizing carriers elsewhere and adding to the uncertainty for aerospace manufacturers like Boeing and Airbus.

As they finalize budgets and strategic plans for 2027, airlines are paring flights on routes that aren’t profitable, with spot jet fuel reaching $4.90 a gallon on Oct. 22. That’s higher than the peak in the weeks after the U.S. and Israel began bombing Iran in February, plunging the Middle East into turmoil. American Airlines, Delta Air Lines, Southwest Airlines and United Airlines have all lowered their profit forecasts for the fourth quarter and are preparing for conditions to worsen next year.

Related: Special Report: The United States’ air transport system is going in reverse

There are already signs of growing financial strain ahead of the northern hemisphere’s winter, traditionally the slowest travel season. Several prominent low-cost carriers in Asia are struggling to make aircraft lease payments, industry sources tell The Air Current, while concerns are growing that at least one other European budget carrier may follow AirBaltic into bankruptcy. JetBlue Airways shares have plunged more than 57% since the start of the war while yields on its debt soared, prompting some bondholders to hire restructuring advisors, The Wall Street Journal reported.

“It’s hard to say if it’s the end of the cycle, but it’s definitely the beginning of a market correction that’s under way and is going to accelerate next year,” George Dimitroff, global head of valuations at Ascend by Cirium, told TAC.

Subscribe to continue reading...