Air Canada's quarterly fuel costs increase by almost $1 billion

Air Canada's fuel bill in the third quarter of 2026 jumped by nearly 75 per cent, with higher prices expected to squeeze profits through the end of 2026.

For the period from July 1 to Sept. 30, 2026, the fuel expenses of Canada's flag carrier reached $2.118 billion, which is up by $906 million from $1.212 billion over the same three-month period in 2025.

Fuel costs accounted for 31.5 per cent of the airline's overall operating expenses in the third quarter of 2026, representing a 22 per cent increase from the same period in 2025.

Furthermore, the fuel expenses for the first nine months of 2026 reached $5.025 billion, which represents an increase of $1.48 billion or about 42 per cent compared to the $3.55 billion recorded in fuel costs over the same nine-month period in 2025.

The airline's fuel prices averaged $1.48 per litre in the third quarter of 2026 — up 68 per cent from $0.88 per litre during the same period in 2025. Over the first nine months of 2026, fuel prices averaged $1.28 per litre — up 40 per cent from $0.91 per litre during the same period in 2025.

Air Canada expects the fuel price for the fourth quarter of 2026 will reach $1.72 per litre, representing a 33 per cent increase from its previous forecast of $1.29 per litre. It expects about half of its fuel needs for this year's final quarter to remain exposed to price fluctuations, which is partly due to the volatility of the cost of refuelling at airports outside of Canada.

Unstable and high fuel prices is the key variable in Air Canada's overall financial forecast.

Global fuel prices have skyrocketed ever since the United States and Israel began their war with Iran in late February 2026.

Air Canada cited the war and shipping disruptions through the Strait of Hormuz as sources of fuel price volatility.

"Aircraft fuel prices have been, and continue to be, subject to high volatility as a result of the ongoing conflicts in the Middle East. Moreover, there has been significant disruption to international shipping trade routes through the Strait of Hormuz, further exacerbating the impact on fuel supply and prices, including for aircraft fuel," reads the airline's 2026 third-quarter report.

"A prolonged or escalating conflict could further disrupt global energy markets and cause aircraft fuel prices to remain elevated or rise even higher. We cannot predict future supply constraints, price volatility or cost of aircraft fuel, or how long current or future conflicts will last or their ultimate impact on global energy markets and across the aviation industry."

Other factors impacting the airline's financial position include U.S. President Donald Trump's trade war with Canada, which has impacted travel demand for the airline's extensive routes reaching American destinations. Since last year, in response to the demand changes, Air Canada has reduced its capacity to select U.S. destinations, and in some cases it has also suspended certain routes.

Rising fuel prices has also impacted the financial viability of non-U.S. international routes. For example, the sudden shock in fuel prices contributed to Air Canada's decision to suspend its non-stop service between Vancouver and Singapore starting in January 2027.

Airlines around the world are feeling the strain of higher fuel prices, although the impact varies depending on where they are based.

Discount airlines have particularly been vulnerable. In May 2026, soaring fuel prices dealt the final blow to U.S. discount carrier Spirit Airlines, which was already struggling financially.

WestJet is also warning that higher fuel prices are exposing broader cost pressures in Canadian aviation. During a session with the Calgary Chamber of Commerce on Oct. 29, 2026, WestJet CEO Alexis von Hoensbroech called for a national aviation strategy to address those challenges.

WestJet notes that fare increases can cover only part of the additional fuel bill, while aircraft, staffing, airport, and air-navigation costs remain. Taxes, fees, and passenger-protection obligations add to the pressure.

"That is why the fuel story is not only about fuel. Fuel is bringing to light what was already there: Canada's aviation system has very few shock absorbers left," said von Hoensbroech.

WestJet also criticized federal financing for some airlines, arguing that this supports subsidized fares, distorts competition, and makes it harder for commercially funded carriers to recover higher fuel costs through ticket prices.

Unlike publicly traded Air Canada, Canada's other major carriers of WestJet, Porter Airlines, and Flair Airlines are privately held and do not routinely publish detailed financial results. WestJet is controlled by private equity firm Onex Partners with its 75 per cent stake, with the remaining ownership split between Delta Air Lines' 12.7 per  cent, Korean Air's 10 per cent, and Air France-KLM's 2.3 per cent.

Air Canada's operating revenue in the third quarter of 2026 increased by 21 per cent to $6.98 billion, reaching a new record for the airline's third quarter. But operating profit in the third quarter of 2026 declined to $261 million from $284 million in the third quarter of 2025.

Air Canada cut its annual adjusted EBITDA forecast to $2.4 billion to $2.7 billion, from $2.9 billion to $3.2 billion. This measure excludes interest, taxes, and certain accounting charges and adjustments.

Despite higher fuel prices and the corresponding upward pressure on airfares, Air Canada carried more than 13.3 million passengers in the third quarter of 2026 — up 9.6 per cent from 12.17 million during the same period in 2025. Over the first nine months of 2026, the airline carried 36.33 million passengers, which is up 6.5 per cent from 34.1 million during the same period in 2025.

Air Canada's fleet size has decreased slightly from 366 aircraft in the third quarter of 2025 to 358 in the third quarter of 2026.