American Airlines Stay Calm While Fuel Costs Soar

The war in the Middle East has pushed jet fuel prices to almost double, yet many U.S. carriers are keeping their eyes on the prize.

United Airlines

• Fuel Resilience: United’s CEO claims the company can absorb the extra fuel bill and even raise fares slightly.
• Booking Momentum: Bookings in the past week are up 15‑20 percent.
• Route Optimization: The airline has cut low‑profit routes to keep the schedule lean.

Delta Air Lines

• Capacity Flexibility: Delta can shrink capacity if fuel stays high.
• Earnings Outlook: Both American and Delta have nudged up their earnings forecasts.

Southwest

• Margin Growth: Expected to grow its margins next year, following a dip in travel last year caused by new tariffs.

Market Dynamics

• Price War Avoidance: The U.S. market was already tight before fuel costs jumped, so carriers feel they can raise prices without sparking a price war.
• 2026 Plans:
• Add ~3 percent more seats overall.
• Ultra‑low‑cost carriers will cut capacity by roughly 10 percent, eliminating the cheapest seats and opening room for higher fares.

International Outlook

• Europe & Asia:
• Lufthansa: 2026 outlook unclear due to uncertainty.
• Wizz Air (Hungary): Conflict will hurt profits.

• Air New Zealand: Trimmed flights for a few months.

• Operational Challenges: Airspace closures, reroutes, and shaky demand add to higher costs.

Analyst Perspective

• Demand Elasticity: Analysts believe U.S. demand can absorb a 5‑7 percent price lift.
• Historical Pricing: Airlines have already raised fares twice by about $10 each way, with business travelers and loyalty members maintaining flight frequency.
• Early Booking Trend: Some passengers are booking early to avoid higher prices.

Passenger Sentiment

• March Demand: U.S. executives report overall demand remains normal for March.
• Economic Confidence: Delta’s chief notes a strong American economy for core customers, keeping bookings steady even amid regional conflict.
• European Flights: Delta reports only a slight drop in Europe‑origin flights; U.S. demand for Europe stays robust.

Future Risks

• Energy Costs: If the conflict drags on, higher energy costs could squeeze households and businesses, testing carrier confidence.