US airlines are raising fares and limiting their plans for new flights as the surge in jet fuel prices has started to eat into their profits. Travel demand remains resilient, but higher fares are not fully offsetting fuel-related costs.
Flight fares in the US have increased by an average of nearly 23% year-on-year in the seven months to September, while overall consumer inflation has been 3.6%. However, Delta Air Lines, Southwest Airlines and American Airlines lowered their 2026 earnings forecasts.
Higher fares, weaker forecasts
Airlines expect to pay between $4.25 and $4.85 per gallon of fuel in the fourth quarter, up from below $4 in the third. United Airlines, which does not issue a full-year forecast, expects a profit for the last three months of the year that was significantly below analysts' estimates.
In the third quarter, United was able to offset 72% of the additional fuel costs through higher revenue. Meanwhile, the four largest U.S. carriers reported record revenue, suggesting that higher fares are supporting revenue but not fully protecting margins.
“The fourth quarter is shaping up to be a tough one from an operational perspective due to high fuel prices and limited capacity plans,“ said Third Bridge analyst Liam Dorsey. The key question, he said, is how long the resilience of consumer demand will last.
Fewer flights in 2027
As another sharp price hike could dampen demand, airlines are moving to cut capacity. Fewer seats in the market could help keep fares higher, but it also means fewer choices for passengers.
Delta CEO Ed Bastian said earlier this month that carriers may have to slow flight growth further in 2027 to maintain prices and profitability. American Airlines also expects slower network growth next year.
Scott Kirby, CEO of United Airlines, warned that fuel prices are likely to remain high in 2027. He said achieving double-digit pretax margins will depend on cheaper fuel, slower capacity growth or continuing a policy of higher fares in place of fuller planes.
The pressure is already being felt most strongly by financially weaker carriers. Alaska Air forecasts a larger-than-expected fourth-quarter loss, Spirit Airlines shut down operations earlier this year, and JetBlue Airways is struggling due to high fuel costs.
Sources: reuters.com, marketscreener.com, investing.com