American travelers face still-higher airfares this year as jet fuel spikes squeeze airline margins, even as carriers post strong revenue growth.
Volatile energy markets and stubborn travel demand are locking in expensive tickets across the United States, while airline executives and analysts warn that higher sales will not automatically deliver fatter profits. CNBC reported that carriers are passing fuel costs through fares, surcharges, and bag fees, trimming schedules, and cutting profit outlooks even as they forecast double-digit third-quarter revenue growth.
The squeeze started with Middle East supply shocks. An Iran war that began at the end of February sent diesel, gasoline, and jet fuel to multi-year or record highs. Disruptions through the Strait of Hormuz lasted most of the year, and on-again-off-again U.S. truce talks since the spring have kept prices jumpy rather than settled.
For passengers, the result shows up at checkout. Airfares rose 23.4% in August from a year earlier in the latest inflation reading. As of Sept. 24, Hopper tracked domestic round-trip Thanksgiving tickets at $402, up 31% from last year, and U.S. Christmas fares at $452 round-trip, up 23%.
Hopper economist Hayley Berg said the early holiday acceptance points away from bargain shoulder-season trips and toward necessary end-of-year travel.
"To me, that signals that they're already thinking about end of year travel and not thinking about any of those filler trips, fall shoulder-season trips,"
Slightly fewer people are flying this year than last, yet overall demand remains strong enough for airlines to hold the line on price. Bernstein noted that U.S. airport security screenings were down just 1% this year through Sept. 20 compared with the same stretch of 2025, a small dip that has not forced carriers into a fare war.
Airlines are also reshaping cabins. More premium seats mean higher revenue per flight, sometimes at the expense of coach inventory. American Airlines is revamping cabins along those lines. Qantas, already running some of the world’s longest routes, is planning even longer London, Sydney and New York, Sydney service next year and in 2028.
American Airlines CEO Robert Isom told a Morgan Stanley investor conference last month the year-over-year revenue backdrop is rare in his career.
"I've never seen in my career, outside of recovery after maybe the pandemic or 9/11... seen a revenue environment in terms of year-over-year improvement,"
That strength has limits. In July, American said it expects an adjusted third-quarter loss between 10 and 70 cents a share and cut its 2026 profit outlook. Analysts have lowered U.S. carrier profit estimates since the summer jet-fuel hike. Delta Air Lines, the most profitable U.S. carrier and one with a refining advantage, was set to open earnings season with third-quarter results and a fresh year-end outlook.
Barclays airline analyst Brandon Oglenski wrote on Sept. 28 that higher booked fares should support similar unit-revenue trends in the fourth quarter for most airlines. He flagged elevated domestic capacity growth in current schedules, about 10% at American and 9% at United, as the figure investors will watch most closely. With elevated energy prices and refining margins for jet fuel persisting, he expects most management teams to curtail capacity-growth plans, with some offering early 2027 planning assumptions.
Raymond James airline analyst Savanthi Syth put the capacity point more bluntly.
"You're going to see more rationalization in capacity,"
Syth said airlines are likely to lower fourth-quarter earnings outlooks. If jet fuel stays in the $4 to $4.50-a-gallon range, carriers will likely cut more flights.
Supply risk did not end when diplomacy flickered. Reuters reported that a short ceasefire with Iran was unlikely to bring quick relief because Middle East refining damage would keep jet fuel tight and costly for months even if the Strait of Hormuz reopened. IATA director general Willie Walsh said recovery could take a period of months to restore needed supply after refining disruptions. Delta had already forecast roughly $2 billion in extra fuel costs and expected to pay about $4.30 a gallon, while cutting profit expectations. Travel stocks jumped on ceasefire hopes, Qantas, Air France-KLM, and others rallied hard, but the physical fuel market moved slower than the headlines.
Earlier price action showed how fast costs can double. Fox News reported that U.S. jet fuel climbed from about $2.17 to $4.57 per gallon by late March on the Argus U.S. Jet Fuel Index after Middle East strikes and supply scares. United Airlines planned to cut about 5% of planned flights in the near term. CEO Scott Kirby warned that if those prices stuck, jet fuel alone could add $11 billion in annual expenses. The Strait of Hormuz moves roughly 20 million barrels of oil per day plus significant jet-fuel volumes, so even slowed tanker traffic hits global aviation fuel.
Qantas CEO Vanessa Hudson told CNBC late last month that carriers cannot plan on a tidy reopening date.
"You can't run the business on the hope that the Strait of Hormuz is going to open at a certain time,"
She added that demand has stayed resilient and that the airline is matching capacity to that reality rather than hoping fuel markets behave.
"There's a backdrop of resilient demand in in this environment. We're making sure that we've got our capacity settings right,"
Spirit Airlines’ collapse in May removed another 1% to 2% of U.S. market capacity, according to Barclays. When a major ultra-low-cost player exits, the remaining network carriers face less pressure to fill every back-of-cabin seat at bargain fares. That removal, layered on fuel-driven schedule trims, supports higher average fares even if total passenger counts are slightly softer year over year.
The mechanism is straightforward. Jet fuel and other distilled products have risen more than crude. Airlines recover the gap through higher base fares, fuel surcharges, and checked-bag fees. They park less profitable flying, add premium cabin space, and warn investors that revenue gains will be eaten by energy costs unless prices retreat. Passengers who need to fly for holidays or work pay first. Shareholders wait for proof that unit revenue can outrun the fuel bill.
None of this requires a mystery. When a chokepoint that carries a huge share of seaborne energy is disrupted for most of a year, refining margins stay wide, and jet fuel stays expensive. Domestic capacity growth that looks aggressive on paper gets watched, and often walked back, once the fuel invoice lands. American travelers see the 23% to 31% holiday fare jumps. Carriers see strong top-line growth paired with cut profit guides and talk of further rationalization if prices hold near $4 to $4.50 a gallon.
Energy shocks travel straight into the ticket price, and no amount of revenue cheerleading erases a fuel bill that doubled. Markets still clear, travelers pay more, airlines fly less marginal routes, and profits stay hard-earned until supply is truly fixed.