U.S. airlines are increasingly willing to fly with empty seats rather than cut fares just to fill them, betting that disciplined pricing and flight schedules will help protect profits at a time of soaring fuel costs.
The strategy generated substantial revenue gains as demand held up despite large tariff increases. Yet profits have been squeezed further as jet fuel prices have jumped about 90% since the start of the U.S.-Israeli war with Iran in February, forcing several major carriers to lower their profit forecasts.
Executives at Delta Air Lines, United Airlines, American Airlines, Southwest Airlines and Alaska Air Group have focused on protecting margins rather than increasing passenger volume.
Their resolve will be tested in 2027. Industry timetables point to an increase in flight capacity, which could intensify competition for passengers even as fuel prices are expected to remain high and make it harder to repeat this year’s substantial fare hikes.
“If fuel prices remain high, we need to continue to increase yields so we can make some money,” U.S. Chief Financial Officer Devon May told Reuters on Thursday. Yield is the revenue airlines receive for each mile passengers travel.
Six major U.S. airlines plan to increase domestic capacity by 3.0% in the fourth quarter from a year earlier and 3.8% in the first quarter of 2027, a sharp acceleration from just 0.2% growth in the third quarter, according to Airlines for America, citing Cirium data.
U.S. airfares rose an average of nearly 23% year over year in the seven months through September, far outpacing the 3.6% average increase in overall consumer prices, according to Labor Department data.
Airlines are always looking for raises. JetBlue Airways launched a $10 one-way increase in published domestic fares on Wednesday, JP Morgan said, following a similar increase led by United the week before that Southwest later matched.
United said it had nothing else to add, while Southwest said it does not publicly discuss pricing. JetBlue did not immediately respond to a request for comment.
A different approach
Airlines have long balanced their fares based on how full their planes are. But high fuel costs have prompted executives to sacrifice occupancy and avoid cuts.
United’s commercial chief Andrew Nocella gave an example during the earnings conference call on Wednesday. Its leisure load factor, a measure of how many available seats are occupied, fell 1.3 percentage points in the third quarter.
Nocella acknowledged that the drop showed “a small amount of elasticity given rising ticket prices” but called it “a trade we would make every day.”
American Airlines’ planes flew less full in the third quarter, even as passenger yield jumped more than 18%. Chief Financial Officer May told Reuters the move was deliberate.
Delta also has “managed the business to generate margins,” CEO Ed Bastian said.
In the Delta, U.S., Southwest and Alaska regions, passenger revenues increased nearly $8.8 billion, or 18 percent, in the third quarter from a year earlier, while passenger traffic increased less than 1 percent.
This divergence shows how revenue growth now depends on earning more for each passenger rather than carrying more. Premium products and changes in passenger mix also contributed to the gains.
The Transportation Security Administration screened 2.9% fewer people at U.S. airports in the quarter compared to a year earlier, raising questions about whether higher fares are starting to discourage travel. Limited capacity growth and the closure of budget airline Spirit Airlines also weighed on traffic.
Airline executives insisted demand remained resilient.
“These higher fares are not causing volume erosion,” Southwest CEO Bob Jordan told analysts after the airline reported a nearly 22% increase in average passenger fares during the first nine months of this year.
The 2027 event
But record revenues weren’t enough to protect profits from soaring fuel costs. Spot prices for jet fuel on the Gulf Coast rose from $2.43 a gallon before the war began in February to $4.63 on Oct. 20, according to data from the U.S. Energy Information Administration.
Delta and Southwest cut their annual profit forecasts, while American expects a loss for the full year despite a sharp rise in passenger revenue.
Airlines are now reviewing their expansion plans. American intends to slow its growth significantly next year, with May saying the carrier was reassessing whether additional flights would generate enough revenue to cover its operating costs.
Southwest has pledged not to pursue growth at the expense of profitability, while United executives have warned that the airlines’ published capacity plans for 2027 may not come to fruition.
Such restraint could help keep prices higher. But traveling less can increase operating costs per seat, while pushing prices higher risks discouraging travelers who have already absorbed steep increases.
But airline executives say a disciplined approach to capacity can allow the industry to maintain its price gains.
“We think these yield gains are very sustainable,” May said.
Gn bussni
