US airlines struggle to offset soaring fuel costs with big fare hikes
XLI•U.S. airlines raised fares nearly 23% year over year through September, but higher fuel costs pressured margins. Delta, Southwest and American lowered their 2026 earnings forecasts, and airlines expect fourth-quarter jet fuel prices of $4.25 to $4.85 a gallon.
1. Fuel costs pressure profits
Strong passenger demand and higher fares helped U.S. airlines post record third-quarter revenue, but rising jet fuel costs pressured margins. Delta, Southwest and American lowered their 2026 earnings forecasts as fares lagged the increase in fuel expenses.
2. Fares and fuel outlook
Average U.S. airfares rose nearly 23% year over year in the seven months through September. Airlines expect to pay $4.25 to $4.85 a gallon for fuel in the fourth quarter, compared with well below $4.00 in the third quarter. United said it recaptured 72% of additional fuel costs through revenue gains in the third quarter and projected fourth-quarter profit below Wall Street expectations.
3. Capacity plans tighten
With further fare increases constrained by the risk of weakening demand, carriers are turning to tighter capacity plans. Delta’s CEO said airlines may need to curb flight growth further next year, while American expects network growth to slow in 2027 compared with this year.
