A recent regulatory filing from Alaska Air Group gives the clearest look yet at how soaring fuel prices are affecting U.S. airlines.
In a Form 8-K document submitted to the Securities and Exchange Commission, the parent company of Alaska Airlines, Hawaiian Airlines, and Horizon Air said fuel refining margins “have been particularly volatile in recent weeks.”
Alaska Air Group’s lowest-cost fuel source is typically Singapore, accounting for about 20% of the company’s fuel supply. Refining margins from this source have shot up by around 400% since early February, the filing stated, from an average of about $0.45 to around $2.25 per gallon.
U.S. refining costs are up approximately 140% in the same period.
Alaska Air Group has been looking at expanding sourcing from Singapore to help offset reliance on high-cost West Coast fuel.
Oil prices have surged globally since the outbreak of fighting between the U.S., Israel, and Iran in February. Iran has effectively closed the Strait of Hormuz, through which about 25% of the world’s seaborne oil passes. It has also damaged oil infrastructure inside several Arab Gulf countries with missiles and drones.
Altogether, the increase in fuel prices is expected to set back Alaska Air Group’s earnings per share by at least $0.70 in the first quarter. The company is also facing financial headwinds from recent unrest in Puerto Vallarta, Mexico, and severe storms and flooding in Hawaii.
Alaska Air Group said it now expects a Q1 adjusted loss per share between $1.50 and $2.
