Jet Fuel Is Up 39% This Quarter. Blame the Crack, Not Crude.

Gulf Coast jet fuel has risen 39% quarter-to-date through August 19. Brent crude is up 26% over the same period. WTI is up 21%. That 13-to-18 point gap between the commodity and the refined product is where airline earnings went this summer, and it is the central teaching point in Raymond James analyst Savanthi Syth’s sector note published Monday morning.

Syth lowered estimates across the firm’s entire airline coverage universe and raised her jet fuel price forecast for the second half of 2026, 2027, and 2028 by roughly 18%, 14%, and 7%, respectively. Her Brent forecast, by contrast, was revised just 5%, 1%, and 0% for the same second-half period. The gap between those two sets of numbers is the story.

The Crack Spread Is the Variable

The refining margin, or crack spread, is what separates the cost of a barrel of crude from the price an airline pays at the fuel farm. When that spread widens sharply, hedging crude does not protect airline margins. An airline with Brent exposure locked in at favorable levels still pays the widened refinery margin on every gallon it lifts. Syth was explicit: the higher fuel forecast primarily reflects elevated refining margin assumptions, not crude prices.

Claims about FBO Jet-A averaging $8.31 per gallon in August, based on an Aviation Week survey, could not be verified. Aviation Week’s most recent widely circulated U.S. fuel survey showed an average of $6.61 per gallon in August 2025. More broadly, FBO retail prices are not the same as wholesale spot pricing, but they often move in the same direction when refining margins are doing the work.

Why Allegiant Gets an Upgrade

The counterintuitive move in the note is lifting ALGT to Strong Buy from Outperform even while cutting the group. Allegiant pulled back more than peers on a quarter-to-date basis despite what Syth described as a constructive fundamental backdrop excluding fuel. The airline’s flexible capacity model lets it shrink peak-period flying faster than network carriers when unit economics deteriorate. The Sun Country acquisition, which closed on May 13, 2026, added scale that further extends that flexibility. Allegiant shares rose more than 2% in premarket trading Monday.

The rest of the group looks harder. Syth’s revised 2026 forecasts include a 51-cent loss for American Airlines and a $2.43 loss for JetBlue, both below consensus. For JetBlue specifically, the firm said a Chapter 11 restructuring may be the more prudent path for the capital structure, though it does not anticipate a liquidity crisis in 2026 absent additional macro shocks. Raymond James also maintained Outperform ratings on American and Southwest alongside the Allegiant upgrade, favoring carriers with idiosyncratic earnings drivers that can offset fuel pressure.

What to Watch This Week

Relative weakness across the airline group is worth monitoring closely in the sessions ahead. DAL, AAL, and LUV have each sold off on the fuel revision. The question for active traders is whether that weakness becomes a sector rotation signal or simply a temporary reset ahead of the next demand read from TSA throughput data. Claims about early TSA data showing softening in late-summer travel volume could not be verified from primary TSA releases in time for publication.

The Trader’s Lesson

Commodity hedges only protect against the variable they cover. When refining margins move independently of crude, a Brent hedge leaves the crack spread entirely unhedged. Understanding what you are actually protected against, and what you are not, is as important in equity analysis as it is on the trading desk.