Soaring Jet Fuel Prices Cost WestJet and Air Canada Billions Amid Strait of Hormuz Disruption
WestJet and Air Canada face billions in added fuel costs after a U.S. and Israeli war against Iran disrupted the Strait of Hormuz. WestJet expects its 2026 fuel bill to double to $3.2 billion, resulting in a net loss, while Air Canada's third-quarter profit nearly halved despite record revenue.
Aviation fuel prices have surged dramatically since late February, when the United States and Israel began a war against Iran that cut off the Strait of Hormuz and damaged refineries. The conflict has inflicted severe financial damage on Canada’s two largest airlines, forcing them to raise fares, slash less profitable routes, and absorb billions of dollars in additional expenses.
U.S. Gulf Coast kerosene-type jet fuel sold for US$4.44 a gallon on Tuesday, up from US$2.50 before the war. WestJet Airlines has already paid $1 billion in added fuel costs in 2026, and its total fuel bill for the year is expected to reach $3.2 billion, doubling from the previous year. As a result, the Calgary-based carrier is expected to record a net loss in 2026. WestJet CEO Alexis von Hoensbroech stated that the airline has covered the added costs using cash reserves but has delayed its initial public offering plans.
Air Canada has faced similar pressures. The Montreal-based carrier’s fuel bill rose by $1.5 billion during the first nine months of 2026. In the third quarter alone, fuel expenses reached $2.1 billion, an increase of $906 million compared to the same period in 2025. Despite generating $7 billion in third-quarter revenue—a 21 per cent increase—Air Canada’s profit for the three months ending Sept. 30 fell to $139 million from $264 million a year ago. The airline flew more than 13.3 million passengers in the quarter, an increase of almost 10 per cent from last year.
Both carriers are struggling to pass the full burden of higher fuel prices onto consumers. WestJet’s fare increases are in line with the 15- to 20-per-cent hikes reported by U.S. airlines, falling short of the 25- to 30-per-cent increase required to fully offset the added costs. Air Canada recovered only 46 per cent of its incremental fuel expenses in the third quarter despite raising fares, though it expects that recovery rate to improve to 70 per cent next quarter. Looking ahead, Air Canada expects to pay US$4.60 a gallon for fuel in the fourth quarter, up from its US$3.50 outlook in August.
The competitive landscape has further complicated cost recovery efforts. Porter Airlines borrowed $125 million and Air Transat received $150 million in government aid to navigate the crisis, while WestJet and Air Canada requested no such assistance. To manage expenses, both major airlines are removing unprofitable routes and eliminating some flights entirely. Meanwhile, Canadians are reducing travel to the United States amid the broader economic strain.