Airline bosses are raising ticket prices to keep turning a profit due to the Iran war.
That was the main message from the Big Three airlines — Delta, United, and American — whose CEOs spoke Tuesday at a JP Morgan conference.
While oil prices have risen to over $100 a barrel, jet fuel has risen faster. Brent crude is up 45% over the last month, but the Argus US Jet Fuel Index rose 72% in that time.
United Airlines has even been testing a scenario in which oil prices rise to $175, its CEO said.
Jet fuel is typically the second-largest expense for airlines, after labor.
At the conference, airline executives warned of the impact of rising oil prices but also sought to reassure investors that they’re well positioned to contain them.
Here’s what they said:
Delta Air Lines
Since the Iran war started, Delta Air Lines has seen a “very modest decline” in sales to people in Europe, CEO Ed Bastian said. Although they only make up less than a fifth of its transatlantic business.
“When you’ve got a war in your backyard, people tend to stay home,” he added.
Bastian also told the conference that Delta is “well-positioned” to “recapture” the rise in fuel costs, giving two main reasons.
First, he cited Delta’s premium brand that gives it a “position of strength” to raise ticket prices.
“All those moves, in my opinion, are just going to make the carriers that are strong even stronger in terms of our ability to continue to grow and continue to expand,” the CEO said.
He also said that Delta has a “meaningful hedge” against fuel prices thanks to its own oil refinery, Monroe Energy.
Unlike their counterparts around the world, most US airlines do not hedge against fuel costs with financial derivatives.
“This will be the first time with a pretty sudden fuel shock that we as an industry will go through it with no one with fuel hedges, which will be, I think, also adding to the need for people to move with a sense of pace,” Bastian said.
“Who knows what the duration of the events that we see unfolding in the Middle East are?” he added. “However they unfold, the one thing I can guarantee you is Delta will be stronger as a result of that.”
United Airlines
United CEO Scott Kirby said the airline has a goal this year to “fully offset the increase in fuel prices.”
However, this would require it to earn an extra 8.5 percentage points of revenue for each seat it flies
“It’s an interesting kind of thought experiment,” he added. “Is that doable or not?”
He then said that the first 10 weeks of 2026 have been the strongest in the airline’s history for bookings. So, strong demand suggests that it might be able to raise prices without losing too many customers.
United is also proactively preparing for the worst by cutting some capacity.
“I’d much rather make the mistake of leaving a couple of months’ worth of demand on the table because we cut more, and then you can get it back, as opposed to making the mistake of oil prices staying higher and longer, and you’re flying flights that lose cash,” Kirby said.
Like Bastian, he also said that if fuel prices stay higher for longer, the airline brand is significant.
“That’s really where it gets interesting. I think there’s a reasonable chance that that happens,” Kirby said. “If it does, it’s going to, I think, further accelerate the gap between the brand-loyal airlines and everyone else.”
United has looked at a scenario where the Strait of Hormuz is closed for three months and oil prices go up to $175 a barrel, then ends 2027 at $100, Kirby said.
“I think that’s a world where we have the ability to grow earnings next year,” he added.
American Airlines
CEO Robert Isom said American Airlines has spent an additional $400 million on fuel.
If the rising prices are short-term, “there’s absolutely an impact to the first quarter in terms of profitability, and likely an impact in the second quarter as well,” Isom said. “But we’re going to make sure that we do the right things to react to that.”
If oil prices stay higher for longer, Isom said: “We’re certainly going to be nimble in terms of capacity, to make sure that supply and demand stay in balance.”
In other words, taking similar action to what United is already doing proactively: cutting some flights.
Isom said he has “great confidence” that American will be profitable this year.
If fuel prices hadn’t gone up, he added, American’s first-quarter earnings would still be profitable despite the huge impact of Winter Storm Gianna.
Read the full article here
