Airline CEOs warn of flight cuts and sticky fares as jet fuel costs surge

If you are waiting for airfares to come back down once jet fuel prices ease, the people running America's biggest airlines have a message for you: don't count on it.

Executives from American Airlines, United Airlines, and Southwest Airlines gathered at the Morgan Stanley Laguna Conference in California this week, where each cautioned that stubbornly elevated fuel costs are already prompting reductions in scheduled flights — and that the elevated fares travelers are currently paying could persist long after the fuel spike subsides.

The global average price of jet fuel climbed 6.1% week over week to $181.46 per barrel last week, according to the International Air Transport Association.

The price surge is rooted in the war involving Iran and the closure of the Strait of Hormuz. Jet fuel prices roughly doubled earlier this year as fighting resumed, then rose further in recent weeks, driven by Iran's tightening grip on the strait, escalating conflict in Yemen, and an attack by militants in Iraq on the East-West Crude Oil Pipeline in Saudi Arabia — a key alternative route — that compelled Saudi Aramco to temporarily shut it down.

American Airlines CEO Robert Isom said the airline still expects third-quarter revenue to rise 16% to 19% from the same period last year, citing strength in both domestic and international markets and across premium and economy cabins. But he was direct about what comes next if costs stay where they are.

If fuel prices remain as high as they are right now, I think that that's going to require some adjustments in terms of our capacity planning as we take a look into the future.— Robert Isom, CEO, American Airlines

American Airlines CFO Devon May put a dollar figure on the problem: fourth-quarter jet fuel prices are running about $1 per gallon above what the airline projected in July, an increase expected to add roughly $1 billion to American's fuel costs.

Overall for the third quarter, we feel great. What's happened in the last four weeks, though, is fuel's run up probably $1 a gallon or something like that for the fourth quarter alone.— Devon May, CFO, American Airlines

United Airlines CFO Michael Leskinen went further, confirming that some December flights have already been pulled from the schedule.

As you look into the fourth quarter, there'll be some flights in December that we won't fly that we thought we were going to fly. If fuel remains high, we'll make some adjustments into the first quarter and beyond into 2027.— Michael Leskinen, CFO, United Airlines

Southwest Airlines CFO Tom Doxey said the carrier has already eliminated about half of the modest year-over-year capacity growth it had planned at the start of 2026. Speaking later to Fox Business, a Southwest spokesperson clarified that the schedule adjustments made to date have been limited and that Doxey's remarks were meant as an illustration rather than a description of actions already taken.

Despite the capacity warnings, all three executives described demand as resilient. Leskinen called United's fourth-quarter bookings 'tremendously strong' and said there was 'very little evidence of demand destruction.' Doxey said stronger-than-expected fall bookings have helped Southwest maintain its third-quarter earnings guidance.

That resilience is precisely what is giving airline leaders confidence to hold fares high — and to keep them there even after fuel costs eventually ease. United CEO Scott Kirby told investors on United's latest earnings call that the longer consumers pay elevated prices, the more likely airlines are to treat that revenue as permanent.

The longer consumers pay these prices and airlines get used to this revenue stream, the more likely it is (to hold).— Scott Kirby, CEO, United Airlines

United passengers are now paying roughly 20% more per mile flown than they were a year ago. Delta CEO Ed Bastian indicated that his airline plans to "retain" the fare increases tied to higher fuel costs, gains that have come alongside fee hikes such as checked baggage charges climbing to as much as $200.

I think that what you're seeing is recognition that travel is still a good deal.— Robert Isom, CEO, American Airlines

Derek Reisfield, co-founder of MarketWatch and a former McKinsey consultant specializing in transportation, told the New York Post that carriers have few options beyond passing fuel costs along to customers if they want to remain profitable, while cautioning that a deeper, structural shift in the industry may prove to be the more significant development.

The result that would worry me most… is if airlines reduce their fleets and flight schedules. That would tend to boost prices as supply gets reduced.— Derek Reisfield, co-founder, MarketWatch

Reisfield also pointed to the weakening of low-cost competition as a factor giving major carriers more pricing room. Spirit Airlines has sought bankruptcy protection twice over the past two years, and the New York Post reported that the Trump administration is reportedly weighing a plan to take over the struggling carrier.

If you remove low-cost competition from the equation… consumers will have fewer options and higher prices.— Derek Reisfield, co-founder, MarketWatch

American trails competitors United and Delta in profitability, a gap that has created friction between the airline's leadership and certain work groups, according to Airline Geeks. Isom used the conference to highlight investments he says are beginning to pay off: Flagship suites, Starlink internet expansion, the return of seatback entertainment screens, and a wave of new airport lounges. He also noted that 30% of American's seats now generate 50% of its revenue, a premium-cabin share he expects to grow as the airline takes delivery of new aircraft including the Airbus A321XLR.

Why it matters — Travelers face a double bind: major airlines are cutting flights in response to fuel costs that are 80% above last year, while CEOs signal they intend to keep fares elevated even if those costs eventually ease.

Sources differ on Southwest capacity cuts: Southwest CFO Tom Doxey said the carrier has eliminated about half of its planned year-over-year capacity growth for 2026. (livenowfox.com) vs A Southwest spokesperson told Fox Business that schedule changes so far have been minimal and that Doxey was making an 'illustrative point,' not describing a completed action. (livenowfox.com)

Reported by thestreet.com, reuters.com, airlinegeeks.com, nypost.com, livenowfox.com