Alaska Airlines taking on $1 billion in debt as jet fuel costs spike amid ongoing Iran War

Alaska Airlines announced it’s preparing to take on as much as one billion dollars in new debt.

The Seattle Times reported the airline is facing higher-than-expected fuel costs this year, putting pressure on its balance sheet as it works to recover from recent operational challenges.

Alaska Air Group — the parent company of Alaska Airlines, Hawaiian Airlines, and regional carrier Horizon Air — stated that the additional borrowing would help maintain cash flow and keep its fleet and schedules on track. The company is looking to raise $1 billion through both a debt offering and through a new tranche to an existing loan.

The Seattle-based carrier announced it has lost $193 million in the first three months of 2026. In response to its financial situation, Alaska Airlines decided to cancel several flights as the war in Iran continues to drive up jet fuel prices. Alaska already raised baggage fees, and now the airline is cutting capacity in May and June. A spokesperson for Alaska Airlines said the cuts mostly affect late-night departures in high-frequency markets.

The airline is also suspending its financial guidance for the rest of the year, warning that fuel costs are expected to keep climbing.

Jet fuel averaged under $3 per gallon in the first quarter, but Alaska expects it to reach $4.75 per gallon this month. Delta, Southwest, and United previously raised baggage fees and cut capacity to offset the surge in fuel costs.

Jet fuel supplies are lagging. What does that mean for airlines and travelers?

A looming jet fuel shortage in Europe and Asia could compound the Iran war’s impact on world travel within weeks if a fragile agreement to reopen the Strait of Hormuz collapses, making higher airfares and flight cancellations even more likely as the summer travel season approaches.

Crude oil prices plunged after Iran’s foreign minister said tankers and other commercial vessels could again pass unimpeded through the narrow waterway off the country’s coast that serves as a conduit for about one-fifth of the world’s oil and natural gas.

President Donald Trump cheered the announcement but then said the U.S. would continue its blockade of Iranian ships entering or leaving the strait until Washington and Tehran reached a deal to end the war, which started Feb. 28 when the U.S. and Israel attacked Iran.

The oil market is expected to take months to recover from shipment disruptions, and fuel prices typically take longer to fall than prices for crude. In a sign of the conflict’s ongoing repercussions for airlines and their passengers, Air Canada said Friday it was canceling service to New York’s John F. Kennedy International Airport between June and October due to surging jet fuel costs.

Jet fuel — a refined kerosene-based oil product — is airlines’ biggest cost, making up about 30% of overall expenses, according to the International Air Transport Association. And jet fuel prices have roughly doubled since the war began. Shortages could start next.

In an exclusive interview with The Associated Press, International Energy Agency Director Fatih Birol said Europe had “maybe six weeks” of remaining jet fuel supplies. In general, some European countries hold several months’ worth of jet fuel inventory at a time, according to an IEA report released this week.

Airline officials have largely reacted with caution, acknowledging potential fuel issues but working to reassure customers. Still, some carriers have already passed costs on to consumers by increasing fees for baggage and other add-ons, embedding costs into ticket prices, or raising fuel surcharges.

Alaska Air Group still eyeing expansion despite financial turbulence

Alaska Air Group CEO Ben Minicucci told The Seattle Times that the carrier is continuing to work towards expansion.

“We will get through this financial fuel crisis,” Minicucci told The Seattle Times. “So we’re not going to hold back and delay implementing our strategy for a short-term impact. When things get back to normal … when normal comes, we want to be able to punch the accelerator.”

According to The Associated Press, the closure of the strait has also nearly doubled the cost of jet fuel.

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