Key takeaways: U.S. airfare prices in August rose 23.4% year over year, and ticket prices for Thanksgiving and Christmas also climbed sharply.

With jet fuel costs staying elevated and highly volatile, combined with constrained capacity, airlines have ample reason to keep fares high.

Rising fuel expenses are eating into incremental revenue, prompting analysts and carriers to lower or reassess their profit expectations.

On April 24, 2026, in California, a plane was about to land at San Diego International Airport, with a Shell gas station displaying fuel prices.

With fuel prices swinging wildly and travel demand proving resilient, airfare prices may remain elevated this year, but achieving profitability is becoming harder for airlines.

The conflict that broke out in late February pushed diesel, gasoline, and jet fuel — an airline's largest cost item after labor — to multi-year highs, with some prices even hitting record levels.

Shipping through the Strait of Hormuz was disrupted for much of the time, and combined with strong demand, the increase in jet fuel and other petroleum distillate products has outpaced crude oil itself.

Airline executives expect jet fuel costs to be slow to fall in the near term, and travel demand is not expected to decline.

Qantas CEO Vanessa Hudson said in an interview late last month: "A business cannot operate by pinning its hopes on when the Strait of Hormuz will resume shipping."

This Australian airline operates several of the world's ultra-long-haul routes and plans to add London-Sydney and New York-Sydney routes next year and in 2028.

"The broader backdrop right now is that travel demand remains firm. We are managing capacity deployment reasonably."

Airlines are passing on soaring fuel costs to consumers by raising ticket prices, adding fuel surcharges, and increasing baggage fees.

Since this spring, ceasefire negotiations between the United States and Iran have been intermittent, causing fuel prices to fluctuate repeatedly; but consumers have continued to book tickets, allowing airlines to preserve the revenue gains from price increases.

Major carriers are also adding more premium seats in cabins, emphasizing high-priced, spacious seat products, and some airlines have directly reduced standard economy seat counts to do so.

Although the number of travelers this year is slightly lower than last year, overall demand remains strong even as fares rise.

A Bernstein research report dated September 23 showed that as of September 20, U.S. airport security screenings were down 1% compared with the same period in 2025.

The latest U.S. inflation data showed that airfare prices in August rose 23.4% year over year.

Holiday travel fares rose even more. Data from ticket tracking platform Hopper showed that as of September 24, the average round-trip domestic U.S. airfare for Thanksgiving was $402, up 31% year over year; the average round-trip fare for Christmas was $452, up 23% year over year.

Hopper economist Hayley Berg said holiday family reunion travel is rigid demand, and many travelers will still book even if they are unhappy with high fares.

Many consumers are also locking in Thanksgiving and Christmas flights earlier than in previous years.

Berg said business travel demand has been strong in recent months, and off-peak bargain hunting is no longer a skill exclusive to seasoned travelers; but concentrated consumer bookings for holiday trips also mean that discounted fares may appear during ordinary non-holiday periods.

"This shows people are prioritizing year-end holiday travel and no longer planning those secondary trips, such as short-haul trips in the autumn shoulder season."

Revenue Grows Strongly, but Profit Outlook Darkens

Even with a slight decline in passenger numbers, airlines' third-quarter revenue is still expected to achieve double-digit growth, driven by higher passenger spending.

American Airlines' CEO said at a Morgan Stanley investor conference last month: "Apart from the pandemic or the recovery phase after 9/11, I have almost never seen such impressive year-over-year revenue performance in my career."

The carrier is renovating cabins and adding premium seats to benchmark against competitors.

Despite higher fares, jet fuel prices rose again after the start of summer, and Wall Street analysts have lowered profit expectations for U.S. airlines.

American Airlines warned in July that its adjusted third-quarter loss per share was expected to be $0.10-$0.70, while also cutting its full-year 2026 profit guidance.

On May 22, 2026, travelers at San Francisco International Airport in California.

This Friday, Delta Air Lines will kick off the airline earnings season, giving investors and consumers planning to buy tickets a look at the industry's outlook.

Delta is the most profitable U.S. airline, and its own refinery also gives it an advantage. The company will report third-quarter results and update its year-end operating outlook.

Raymond James airline industry analyst Savanthi Syth said Wall Street is focused mainly on the fourth quarter and beyond, and airlines will likely lower profit expectations for that quarter.

She believes airlines will not broadly raise ticket prices across the board again; but if jet fuel remains at $4-$4.50 per gallon, airlines will likely cut flight supply, and fewer seats will ultimately push fares higher again.

"We will see more capacity optimization adjustments."

Capacity Growth Draws Close Attention

Volatile fuel prices have made airlines more conservative in their operations, and many have cut loss-making or underperforming routes.

Barclays data showed that, combined with the shutdown of low-cost carrier Spirit Airlines in May, overall U.S. market capacity contracted directly by 1%-2%.

This has given both full-service and low-cost carriers stronger pricing power this year.

But if oil prices fall back, investors will closely watch whether airlines significantly increase capacity — a big capacity increase would in turn push airfare prices lower.

Barclays airline analyst Brandon Oglenski wrote in a September 28 research report: "We expect most airlines' fourth-quarter booked fares to support unit revenue in a similar trend; but American Airlines and United Airlines currently plan to expand domestic capacity by 10% and 9%, respectively, and that will be the guidance investors focus on most. With energy and jet fuel refining costs staying high, most managements will likely significantly scale back capacity expansion plans, and some companies may disclose 2027 planning assumptions early."