US airlines brace for second year of turmoil as fuel costs surge

Published Sat, Mar 7, 2026 · 11:39 AM

[NEW YORK] US airlines were preparing to put aside the chaos caused by US President Donald Trump’s tariffs this year and the ensuing plunge in travel demand. Instead, they face a second year of turmoil as jet fuel prices spike amid war in the Middle East.

Jet fuel, responsible for as much as 30 per cent of an airline’s costs, soared in the past week to over US$4 a gallon after hovering around US$2 for most of 2025. As a result, airlines now have to find the right balance between raising fares to cover that expense and being mindful of the price sensitivity of cash-strapped customers.

Unlike their European peers, US carriers do not hedge fuel, meaning any increase in price has a potentially more immediate effect. American Airlines Group, JetBlue Airways and Spirit Aviation Holdings may be among the hardest hit because they generally cater to more price-sensitive and domestic travellers.

American Airlines is disproportionately exposed, with every 10-cent change in the cost of a gallon of fuel translating to a 25 per cent swing in the carrier’s earnings per share, according to Rothschild analyst James Goodall.

“Coming into 2026, the underlying backdrop for the US airlines was positive,” Goodall wrote in a Mar 5 note. “Higher fuel prices result in a material cut to our forecasts and an expectation of substantial downgrades to consensus this year.”

American, JetBlue and Spirit declined to comment on the impact of rising fuel prices.

Trump’s so-called Liberation Day tariff, announced in April, initially caused travel demand to plunge amid economic uncertainty, clouding airlines’ ability to gauge future demand. Upbeat predictions at the start of the year quickly soured, prompting some carriers to temporarily withdraw their annual financial guidance.

Airlines were hit again later in the year when a record government shutdown in November prompted the administration to implement flight restrictions at 40 major airports.

The picture improved for the industry towards year’s end, in no small part because more affluent customers continued to splurge on premium seats. Now, the rising fuel costs and the potential knock on people’s appetite to fly long distances might dim the picture again.

Carriers with higher margins, lower fuel-expense exposure and the “dampening impact of generous profit-sharing programmes” are more equipped to absorb the shock, Citi analyst John Godyn said in a note.

Delta Air Lines and United Airlines Holdings have frequently described a “K-shaped” demand environment in which higher-income travellers continue to spend even as more budget-conscious consumers pull back. That dynamic may give the companies more room to pass on higher costs through ticket prices.

That may not be the case for other carriers. Spirit Airlines, which last month reached an agreement with noteholders allowing it to exit bankruptcy later this year, is already trying to shift towards a slightly more upscale model.

Spirit plans to shrink its fleet, cut off-peak flying and expand premium-style seating, a strategy that could prove difficult if rising fares clip demand among its traditionally budget-focused passengers.

JetBlue was also counting on higher-paying customers to return to profitability and generate free cash flow by 2027 after a bruising 2025. The airline is adding first class to domestic flights as well as opening its first airport lounges.

American Airlines has worked to catch up to United and Delta with its more premium offerings, after its middling performance stoked unrest within its pilot and flight attendant unions.

American is also trying to win back corporate flyers alienated by an unpopular, and since reversed, sales and distribution strategy that sought to push customers away from booking agencies in favour of buying directly through American’s website or app. BLOOMBERG