US airlines push fares higher as fuel soars

U.S. airlines are seeing fewer passengers even as ticket prices surge, with the number of people screened at U.S. airport checkpoints on track for its first annual decline since 2020. Since April, about 9.3 million fewer people have been screened compared with the same period of 2025, a drop of less than 2%. The Transportation Security Administration also screened 2.9% fewer people in the third quarter than a year earlier, indicating some softening in overall traffic.

Individual carriers are reporting similar patterns. Southwest Airlines (LUV)’ revenue passengers fell 3.2% year-on-year in the third quarter to about 33.5 million, while American Airlines (AAL)’ load factor in the period declined to 83.4% from 86% a year earlier. Despite these declines, airlines report that those who do fly are paying more, and that demand for premium seating remains strong.

Airfares have risen rapidly this year as carriers pass higher fuel costs on to customers. Fares in September were up more than 22% from a year earlier, and U.S. air fares rose an average of nearly 23% year-on-year in the seven months through September. One example is Southwest, where the average fare in the third quarter reached $231.69, nearly $50 higher than a year before.

At the same time, jet fuel costs have surged. U.S. Gulf Coast spot jet fuel prices climbed to $4.63 a gallon, more than double year-ago levels. Across the industry, spot prices increased from $2.43 a gallon in February to $4.63 on October 20. United Airlines (UAL) expects to pay an average of $4.80 a gallon for fuel in the fourth quarter, up from $3.90 in the third quarter, underscoring the ongoing cost pressure.

In response, airlines are emphasizing yield, or revenue per passenger mile, rather than maximizing load factors. American Airlines (AAL)’ chief commercial officer described an active prioritization of yield over load factor, aligning with the carrier’s premium investments. American (AAL)’s finance chief said the airline is prepared to continue pushing yields higher if fuel remains elevated, in order to maintain profitability.

Executives at Delta Air Lines (DAL), United Airlines, American Airlines, Southwest Airlines and Alaska Air Group have stressed margin protection over boosting passenger volumes. Delta’s leadership said it is managing the business for margins, and Southwest’s CEO indicated the airline will not pursue growth at the expense of profitability. Across Delta, United, American, Southwest and Alaska, passenger revenue in the third quarter rose nearly $8.8 billion, or 18%, from a year earlier, while passenger traffic increased less than 1%.

Airlines report that travel demand remains resilient, particularly for higher-priced products. Demand for first class, business class and premium economy is described as robust, helping drive higher unit revenues. United flew 2.4% more passengers in the third quarter than a year earlier and reported a 16% increase in unit revenue, its largest gain since the pandemic.

Southwest’s results also highlight strong pricing. The airline’s average fares in the first nine months of the year were nearly 22% higher, and in the third quarter, average fares and passenger counts exceeded its expectations. The carrier noted that passenger fares came in about $3 above forecast while volumes also beat projections, suggesting that higher prices have not yet caused a significant erosion in demand among its customers.

Despite robust revenue trends, elevated fuel costs have weighed on profitability. American, United, Delta and Southwest all cut their profit forecasts for 2026, and American is the only one of the four that expects a loss for the year. Delta and Southwest have reduced their annual earnings guidance, even as passenger revenue climbs.

Carriers are also rethinking capacity growth as they balance demand, pricing and costs. American plans to slow growth next year, reassessing whether additional flights can cover their operating costs, while United has cautioned that some published 2027 capacity plans may not materialize. At the same time, schedules point to domestic capacity growth in upcoming quarters, and the shutdown of budget carrier Spirit Airlines in early May has removed a low-cost competitor, influencing overall traffic levels.