Southwest Airlines

Jet fuel has nearly doubled since the Iran war began. Now America’s biggest airlines are telling travelers they have no choice but to raise fares — and the increases could reach 20% heading into peak summer season. America’s four largest airlines are raising fares and cutting routes this summer as jet fuel costs that nearly doubled following the Feb. 28 outbreak of U.S.-Iran hostilities force billions in new expenses onto travelers. The surge, triggered by the de facto closure of the Strait of Hormuz, pushed average U.S. jet fuel prices from a pre-war baseline of roughly $2.50 per gallon to as high as $4.88 per gallon — an 85% average increase that analysts have described as the most severe fuel crisis in the history of civilian aviation. At high-demand hubs such as Los Angeles International and New York’s John F. Kennedy International airports, costs spiked 110%. Compounding the pressure, not one of the major U.S. carriers entered the crisis with meaningful fuel hedges in place. While European carriers such as Lufthansa protected 80% of their consumption through derivative contracts, American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines are absorbing the full force of market volatility — a structural vulnerability that has elevated fuel to more than 20% to 25% of all operating expenses. UNITED AIRLINES United CEO Scott Kirby has been the most direct about where the burden is headed. Kirby told investors the carrier will “do whatever it takes” to maintain profitability and is targeting passenger yield increases of 15% to 20% — a figure that could translate to a roughly equivalent rise in the price of airfare. He said United is already passing through 40% to 50% of the fuel increase “faster than I can ever remember it in my career,” while trimming five percentage points from its rest-of-year schedule. Third- and fourth-quarter capacity is now expected to run flat to slightly up against 2025 levels. AMERICAN AIRLINES American Airlines, the world’s largest carrier by passenger volume, estimates the conflict will add more than $4 billion to its annual fuel bill. Its second-quarter plan assumes an average fuel price of $4 per gallon. As of the week ending April 17, the national average jet fuel price stood at $4.40 per gallon, according to IATA — leaving American’s forecast already running below market reality. The airline has trimmed its 2026 aircraft deliveries from 55 to 49, reducing capital expenditure by nearly $300 million, and reset its full-year earnings guidance from a range of $1.70 to $2.70 per share down to a best-case earnings of $1.10 per share or a loss of $0.40 per share in the worst case. CFO Devon May signaled the airline would be “sharp” with capacity beyond the summer peak if prices do not moderate. DELTA AIR LINES Delta Air Lines expects to pay more than $2 billion for jet fuel in the second quarter alone — a headwind CEO Ed Bastian described as “unprecedented.” The carrier’s domestic refinery is expected to provide roughly $300 million in partial relief during the quarter, but Delta is still planning around a $4.30-per-gallon average and targeting a 6% to 8% operating margin for the June period. SOUTHWEST AIRLINES Southwest Airlines is cushioning the blow through a broad business model overhaul that predates the conflict. The carrier’s Jan. 27 switch to assigned seating and tiered fare bundles helped drive an 11.6% yield increase in the first quarter, with the share of customers upgrading from base fares jumping from 20% to 60%. Southwest reported a $227 million first-quarter profit on record revenue of $7.2 billion, but warned that its full-year targets hinge on fuel variables outside management’s control. In June, the airline will suspend operations at Chicago O’Hare and Washington Dulles, channeling that capacity into stronger markets while holding full-year growth to just 2%. PREMIUM RESILIENCE AND THE ULCC THREAT One partial buffer is holding: premium cabin demand has remained resilient, with American and United both reporting that premium seat sales are growing at twice the rate of main cabin bookings. That divergence is providing critical revenue support. The threat falls most heavily on carriers without that cushion. Spirit Airlines, already in a compromised financial position before the war, has requested emergency federal funding to avoid liquidation — a stark illustration of the widening divide between network carriers and ultra-low-cost operators. ROUTE CUTS AND THE ROAD AHEAD Aviation analytics firm Cirium has identified dozens of route suspensions scheduled for summer 2026. Delta is pulling its Detroit-to-Sacramento service through March 2027, while Air Canada is withdrawing from both Toronto and Montreal to Kennedy airport through late October. Carriers including Edelweiss Air, on the Zurich-to-Denver route, and Norse Atlantic, on Los Angeles-to-London, have announced indefinite suspensions. The cuts concentrate on leisure markets and regional hubs that lack the corporate traffic needed to absorb 15% to 20% fare increases. United Chief Commercial Officer Andrew Nocella suggested that the longer fuel prices hold at current levels, the more likely higher fares are to become “normalized” as consumers adjust to the new pricing floor. U.S. Energy Secretary Chris Wright has announced a coordinated release from the Strategic Petroleum Reserve, but the deployment process is expected to take 120 days and will supply only 1.4 million barrels per day against a market shortfall created by the Hormuz stoppage — providing little immediate relief to the jet fuel spot market. The International Energy Agency has revised its 2026 outlook, projecting that global oil demand will contract for the first time since the COVID-19 pandemic. If crude holds at $130 to $150 per barrel, analysts warn that a second wave of flight cancellations could sweep through the fourth quarter as airline cash reserves thin. Key Takeaways Jet fuel prices have nearly doubled since the Feb. 28 outbreak of U.S.-Iran hostilities, reaching as high as $4.88 per gallon — the worst fuel crisis in commercial aviation history. None of America’s four largest carriers holds meaningful fuel hedges; United is targeting 15%–20% yield increases to achieve full cost pass-through to passengers. American, Delta, Southwest, and United are cutting routes and trimming capacity; dozens of city pairs face suspensions through late 2026 or beyond. Premium cabin demand remains a key revenue buffer; Spirit Airlines has sought emergency federal funding, underlining the existential threat to ultra-low-cost carriers. U.S. Strategic Petroleum Reserve releases offer limited near-term relief; sustained crude at $130–$150 per barrel risks triggering a second cancellation wave in Q4 2026.

Topic: Southwest Airlines

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