U.S. airlines prioritize higher fares over full flights amid soaring fuel costs

U.S. airlines are increasingly willing to operate flights with empty seats rather than cut fares, aiming to preserve profit margins while jet fuel costs have surged nearly 90% since February. Executives at Delta Air Lines, United Airlines, American Airlines, Southwest Airlines and Alaska Air Group said they prefer disciplined pricing and capacity management over boosting passenger volumes.

American Airlines' chief financial officer Devon May told Reuters that if fuel prices remain elevated, the carrier must continue to push yields higher to remain profitable. Yield measures the revenue earned per mile flown by passengers.

Airlines for America, citing Cirium data, reported that the six major carriers plan to increase domestic capacity by 3.0% in the fourth quarter of this year and by 3.8% in the first quarter of 2027, a notable acceleration from the 0.2% growth recorded in the previous quarter.

According to Labor Department data, average U.S. air fares rose about 23% year-on-year through September, far outpacing the 3.6% rise in overall consumer prices. JetBlue recently added a $10 one-way increase to its domestic fares, following a similar hike by United that Southwest later matched.

"If fuel stays elevated, we have to continue to push yield up so that we can make a bit of money," said Devon May.

"Those higher fares are not causing an erosion of volumes," Southwest CEO Bob Jordan told analysts after reporting a 22% rise in average passenger fares for the first nine months.

United’s commercial chief Andrew Nocella noted that the airline’s leisure load factor fell 1.3 percentage points in the third quarter, describing the modest drop as a trade the company is willing to make daily in response to higher ticket prices. Delta CEO Ed Bastian said the airline is "managing the business for margins."

Passenger revenue across the five carriers grew by $8.8 billion, or 18%, in the third quarter, while passenger traffic increased less than 1%, highlighting a shift toward earning more per passenger rather than increasing the number of travelers. Premium products and changes in passenger mix also contributed to revenue growth.

The Transportation Security Administration reported a 2.9% decline in the number of people screened at U.S. airports compared with a year earlier, raising questions about whether higher fares are beginning to deter travel. Executives, however, maintain that demand remains resilient.

Jet fuel prices on the Gulf Coast rose from $2.43 per gallon before February to $4.63 per gallon on October 20, according to the U.S. Energy Information Administration. The higher costs have prompted Delta and Southwest to cut their annual earnings forecasts, while American expects a full-year loss despite higher passenger revenue.

American plans to slow capacity growth next year, with May saying the airline is reassessing whether additional flights will generate sufficient revenue to cover operating costs. Southwest pledged not to pursue growth at the expense of profitability, and United cautioned that its 2027 capacity plans might not be fully realized.

"We think these yield gains are very sustainable," May added.

Industry analysts note that while disciplined capacity management could help sustain fare increases, higher prices risk discouraging travelers who have already absorbed steep fare hikes.