Anabelle Colaco
25 Oct 2026

NEW YORK CITY, New York: U.S. airlines are cutting profit forecasts and considering further capacity reductions as soaring fuel costs outpace steep increases in ticket prices, putting pressure on margins despite record revenue and resilient travel demand.

Average U.S. airfares rose nearly 23 percent year-on-year in the seven months through September, according to Labor Department data.

But among the four largest U.S. carriers, Delta Air Lines, Southwest Airlines, and American Airlines have lowered their 2026 earnings forecasts because higher fares fail to fully offset the sharp rise in fuel costs.

Airlines now expect to pay between US$4.25 and $4.85 a gallon for jet fuel, up from well below $4 a gallon in the third quarter.

United Airlines, which does not provide a full-year forecast, projected fourth-quarter profit well below Wall Street expectations. The airline recovered only 72 percent of its additional fuel costs through third-quarter revenue gains.

All four carriers nevertheless reported record third-quarter revenue, reflecting higher ticket prices.

"The fourth quarter is shaping up to be an operationally tough quarter with jet fuel prices expected to remain elevated, diminished capacity plans, but durable revenue trends from consumers," Third Bridge analyst Liam Dorsey said.

"The big question that remains is how long consumer resiliency lasts."

The pressure comes as the war in Iran stretches into its eighth month, leaving U.S. carriers to decide how much more of the fuel-cost increase they can pass on to passengers without weakening demand.

Earlier this year, airlines said they were confident that higher fares, ancillary revenue, and loyalty-program income would let them recover most of the increase in fuel bills. That confidence has faded as fuel costs have risen faster than expected.

With further fare increases constrained by the risk of hurting demand, carriers are tightening capacity plans to preserve pricing power and limit margin pressure.

Delta CEO Ed Bastian said earlier this month that airlines may need to curb flight growth further next year to sustain higher fares and protect profitability. American said it expects network growth to slow in 2027 compared with this year.

In Europe, Ryanair chief Michael O'Leary said airfares could see their "biggest increase in history" next year.

Alaska Air has forecast a larger-than-expected fourth-quarter loss, while JetBlue Airways and Frontier Airlines are due to report third-quarter results next week.

The S&P Passenger Airlines index is down nearly three percent this year, compared with a gain of more than 13 percent for the benchmark S&P 500.