Thanksgiving airfares are reportedly up 31% from last year. With fuel this expensive, can airlines hold up? How should I view airline stocks like Korean Air right now?
2026-10-21
Higher fares don't mean airlines are winning
The average U.S. Thanksgiving domestic round-trip fare is $402, up 31% from last year (Hopper, 2026 Holiday Travel Index). But airlines are not making money. Jet fuel rose 15% in a month in early October to $4.40 per gallon, 76% above late February when the Iran war began (Live and Let's Fly, 2026-10). Airlines for America (A4A) estimates U.S. airlines' additional fuel costs this year at $24.1 billion, and even if fare increases recover about 60%, the net loss effect would be $8.4 billion (CAPA).
Delta put numbers on it. Third-quarter adjusted EPS of $1.72 missed expectations for the first time in two years, and it cut its full-year EPS outlook from $6.50-7.50 to $5.10-5.60. Third-quarter fuel costs rose 62% to $4.14 billion, and it assumed a fourth-quarter fuel price of about $4.25 per gallon (RTTNews, 2026-10-09).
Who holds up and who breaks down
Even among airlines, the impact of high oil prices is asymmetric.
| Category | Relative winners | Relative losers |
|---|---|---|
| Airline type | Large carriers with high premium-seat and international exposure | Low-cost carriers that rely on price competition |
| Cost pass-through | Carriers that can cut capacity to raise fares | Carriers that can't raise fares because they must fill seats |
| Currency | Airlines in countries with strengthening currencies | Airlines in countries with weak currencies |
United said it would recover 80-90% of the fuel cost increase through fares in the third quarter and 100% in the fourth (United 8-K, 2026-07). United is cutting flights in December and early next year, American is dropping less profitable routes, and Southwest has halved its planned capacity growth for this year (Live and Let's Fly, 2026-10). The strategy is to regain pricing power by cutting seats. This works for large carriers with a solid customer base but is hard for low-cost carriers whose weapon is cheap fares.
Korean Air has a different variable: won strength
The won/dollar rate falling to a two-year low of 1,328.1 won gives Korean airlines a cushion U.S. airlines don't have. Fuel accounts for about 30% of aircraft operating costs and is settled in dollars (dealsite). A stronger won means buying the same fuel more cheaply. Korean Air has disclosed that a 10 won move in the exchange rate changes its foreign currency valuation gain or loss by about 56 billion won (MTN, 2026-09-07). In the second quarter it booked a net FX loss of about 145 billion won as the exchange rate rose, and won strength in the second half moves in the direction of reversing that.
The demand structure is also different. According to MTN, Korean Air's third quarter saw outbound demand from Korea stall due to the fuel surcharge burden, but inbound visitors and transfer passengers filled the gap, and cargo revenue jumped 34.3%, driving growth (MTN, 2026-10-15). By contrast, low-cost carriers that rely on outbound leisure demand from Korea take the full brunt of fuel surcharge increases.
What should investors do
- Airline stocks are effectively leveraged bets on falling oil prices. They would rebound the most if Iran talks are confirmed and Brent falls meaningfully, but with talks reports being reversed within hours, there is no reason to load up before confirmation.
- If you buy, large carriers over low-cost carriers, and Korean Air in particular, with its double cushion of won strength and cargo exposure, is relatively better.
- If won strength reverses, this logic weakens. The Export-Import Bank of Korea sees the won/dollar rate at around 1,400 won at year-end and considers it unlikely to settle in the 1,300s (dealsite). Watch the exchange rate and Brent together, and set a rule in advance to cut exposure if either turns unfavorable.