Major U.S. airlines are shifting their business models to favor expensive tickets over high passenger numbers. As jet fuel prices surge, carriers are increasingly willing to fly with empty seats to ensure they maintain profitable margins per flight.

Why are airfares rising?

The primary driver for this shift is the massive spike in jet fuel costs. Since the conflict involving the U.S., Israel, and Iran began in February, fuel prices have climbed roughly 90%. This has placed immense pressure on airline earnings, leading several companies to lower their profit forecasts.

Read also U.S. airlines prioritize higher fares over filling every seat

To combat these expenses, airlines are focusing on "yield," which is the revenue collected for every mile a passenger flies. This strategy includes:

  • Implementing higher base fares for domestic travel.
  • Increasing the availability of premium seating options.
  • Adding new fees for services like checked bags or preferred seating.

The cost of flying today

While fewer people are being screened at airport checkpoints—marking the first annual decline since 2020—those who do fly are paying significantly more. In September, airfares rose an average of nearly 23% year-on-year, far outpacing general consumer inflation.

This trend is visible across the industry. Southwest Airlines reported that its average passenger fare rose nearly 27% in the third quarter. Even as passenger volumes for some carriers have dipped, the increased revenue from higher prices and premium cabins has helped offset the loss in volume. Delta Air Lines, for example, earned 18% more from its premium cabins in the third quarter, a gain that came despite only a modest 6% expansion in the number of those seats.

What to watch next

The industry faces a potential challenge in 2027. Airlines are planning to grow domestic capacity by roughly 3% in the coming months, which could lead to more competition. If capacity increases while fuel prices remain high, maintaining these substantial fare gains may become more difficult for carriers.

FAQ

What is a load factor?

A load factor is a gauge used to measure how full an airline's planes are during a flight.

Why aren't airlines hedging fuel?

Many airlines are avoiding fuel hedging because they had a "pretty terrible experience with it" in the past, according to flight-deal service Going.com.