WestJet and Air Canada report billions in added fuel costs, cutting profits

Canada's two largest airlines have reported billions of dollars in added fuel costs this year, with WestJet Airlines paying an extra $1 billion and Air Canada's bill rising by $1.5 billion in the first nine months of 2026. WestJet expects its total fuel costs to double from last year to $3.2 billion, a surge that will send the privately owned carrier to a loss. Air Canada said its fuel expenses reached $2.1 billion in the third quarter alone, up $906 million from the same period in 2025. For the January-to-September period, Air Canada's fuel bill topped $5 billion.

"Right now we are literally paying double what we paid a year ago," said Alexis von Hoensbroech, WestJet's chief executive officer. He said the airline has had to cover the added costs from its cash reserves because it could not raise fares enough to match the price spike. Air Canada's profit for the three months ending Sept. 30 fell to $139 million from $264 million a year earlier, even as its revenue rose 21 per cent to $7 billion.

Jet fuel prices soared after the United States and Israel began a war against Iran in late February, cutting off the Strait of Hormuz and damaging refineries. U.S. Gulf Coast jet fuel sold for US$4.44 a gallon on Tuesday, compared with US$2.50 before the conflict, according to the U.S. Energy Information Administration. "We have to work under the assumption that fuel prices will stay elevated," von Hoensbroech said. "They may even go up further, and we work on the assumption that this will be true for all of '27 and maybe into '28."

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John Di Bert, Air Canada's chief financial officer, told analysts that fuel prices will remain high for the "foreseeable future." The airline expects to pay US$4.60 a gallon for fuel in the fourth quarter, up from a US$3.50 outlook in August. Air Canada flew more than 13.3 million passengers in the third quarter, nearly 10 per cent more than a year ago. However, the airline said it was only able to recover 46 per cent of its incremental fuel expenses through higher fares in that quarter, though it expects that figure to improve to 70 per cent in the next.

Airlines globally have responded to higher costs by cutting less profitable routes and raising fares. WestJet's fare increase is in line with the 15 to 20 per cent hikes reported by U.S. airlines, but von Hoensbroech said that is short of the 25 to 30 per cent increase needed to fully cover fuel costs. He cited government fuel subsidies to some carriers as a reason fares have not risen more, arguing that airlines that accepted bailouts used them to expand and undercut rivals. Porter Airlines borrowed $125 million and Air Transat received $150 million, while WestJet and Air Canada requested no aid.

The fuel crisis has also delayed WestJet's long-awaited plans for an initial public offering. "An IPO requires a healthy environment, and the current environment is less healthy than it should be. So right now is certainly not the time to talk about this," von Hoensbroech said. Air Canada has removed unprofitable routes and eliminated some flights to the United States as demand has softened. Mark Galardo, Air Canada's chief commercial officer, said capacity has been slightly reduced for early 2027 and the airline will remove more seats if needed to protect profit margins.

With files from The Globe and Mail