US airlines favor higher fares over fuller planes as fuel costs squeeze profits
XLI•US airlines are prioritizing higher fares and margins over filling seats as fuel costs squeeze profits. Passenger revenue at five major carriers rose nearly $8.8 billion, or 18%, in the third quarter while traffic increased less than 1%; airlines plan to accelerate capacity growth in 2027.
1. Fares over passenger volume
Delta Air Lines, United Airlines, American Airlines, Southwest Airlines and Alaska Air Group are emphasizing margins over passenger volumes as fuel costs rise. Across the five carriers, third-quarter passenger revenue increased nearly $8.8 billion, or 18%, from a year earlier, while passenger traffic grew less than 1%. US air fares rose nearly 23% year on year in the seven months through September, compared with a 3.6% increase in overall consumer prices.
2. Fuel pressures profits
Gulf Coast spot jet fuel prices rose from $2.43 a gallon before the conflict began in February to $4.63 on October 20. Delta and Southwest cut annual earnings forecasts, while American expects a full-year loss despite higher passenger revenue. American CFO Devon May said the airline was reassessing whether additional flights next year would generate enough revenue to cover operating costs.
3. Capacity faces a test
Six major US airlines plan to grow domestic capacity 3.0% in the fourth quarter and 3.8% in the first quarter of 2027, compared with 0.2% growth in the third quarter, citing industry schedule data. Executives say disciplined capacity can help sustain fare increases, though higher prices risk discouraging travelers and flying less can raise costs per seat.
