- The number of people screened at US airport checkpoints is on track for its first annual decline since 2020, as airlines pass soaring jet fuel costs on to travelers. From April through Thursday, about 9.3 million fewer people were screened than in the same period of 2025, according to the TSA, a drop of less than 2% after years of growth.
- Fares in September were up more than 22% from a year earlier, according to the latest inflation data, with jet fuel more than double year-ago levels at $4.63 a gallon on the US Gulf Coast, per the EIA. Southwest’s average third-quarter fare was $231.69, up close to $50 from a year earlier, while its revenue passengers fell 3.2% to about 33.5 million.
- Executives say they are deliberately choosing price over volume, with American Airlines’ Nat Pieper saying the carrier is “actively prioritizing yield versus load factor.” American’s load factor fell to 83.4% from 86%, while United bucked the trend with 2.4% more passengers and a 16% jump in unit revenue, its biggest increase since the pandemic.
- The pricing power has limits, as American, United, Delta and Southwest all cut their 2026 profit forecasts this month, and American is the only one of the four expecting a loss this year. United expects to pay an average of $4.80 a gallon for fuel in the fourth quarter, up from $3.90 in the third.
What Happened?
US airlines reporting third-quarter results this month said fewer people are flying but those who do are paying much more. The sharp rise in jet fuel, airlines’ biggest expense after labor, has pushed carriers to raise fares and focus on recovering as much of the cost as possible. Southwest CEO Bob Jordan said both fares and passenger volumes came in above the company’s forecast. Fare tracker Hopper expects the most expensive holiday ticket prices in years.
Why It Matters?
The industry is trading volume for margin, and so far demand, especially for premium cabins such as business class, has been strong enough to support the strategy. United CEO Scott Kirby said it is possible airlines will keep focusing on yields at the expense of load factor, and that alone could get them to double-digit margins next year. American and others have also cut growth plans or warned the industry could scale back capacity, which could keep fares elevated if demand holds. For consumers, higher airfares add to inflation pressures, while for investors the key question is whether premium demand can offset fuel costs.
What’s Next?
Results from smaller carriers such as Frontier Airlines and Allegiant Air in the coming weeks will show whether price-sensitive travelers are pulling back. Fuel remains the biggest risk, with United’s fourth-quarter fuel forecast pointing to higher costs. The demise of Spirit Airlines in early May may also be weighing on traffic, as Bank of America said some of its customers have likely stopped flying. Holiday travel data will be the next test of how far fares can rise before demand cracks.
Affected Tickers and Coins: LUV, AAL, UAL, DAL, JETS
Source: CNBC
