Airline Stocks Fall Amid Rising Jet Fuel Costs

Shares of U.S. airlines fell in early Wednesday trading after several carriers, including United Airlines (UAL:US), Southwest Airlines (LUV:US), and Alaska Air (ALK:US), updated their third-quarter cost guidance to account for increases in the price of jet fuel, which is one of the major expenses in the industry.

Investors had been cautioned that airlines might face challenges due to higher fuel costs. Airlines are typically more sensitive to factors like revenue, non-fuel costs, and capacity rather than fluctuations in fuel prices. 

However, the recent surge in energy prices is expected to diminish the earnings potential of the airline industry.

More precisely, Southwest Airlines now expects its third-quarter economic fuel costs per gallon to range from $2.70 to $2.80, up from the previous estimate of $2.55 to $2.65. Alaska Air anticipates its fuel cost per gallon to be in the range of $3.15 to $3.25, compared to the prior estimate of $2.70 to $2.80.

Finally, United Airlines has increased its average price per fuel gallon guidance to a range of $2.95 to $3.05, up from the previous range of $2.50 to $2.80.

As a result, Southwest Airlines shares led the decline, falling as much as 3.5%, while United Airlines and Alaska Air both fell 0.8%.

Congressmen Ro Khanna and Daniel S. Goldman have been buying UAL shares in recent months, including the purchase on May 23, when the stock closed at $47.87. He was also trading LUV shares throughout 2022.