What Pressure Reveals in Airlines
How recent shocks are exposing the real differences in airline business models
By: Jacob Gaer
Apr. 9, 2026
At the beginning of 2026, airlines were preparing for an exciting year with incredible momentum from 2025 and forecasts for high travel demand throughout 2026. Delta posted a record revenue of $58.3B in 2025 and gave guidance for over 20% EPS growth this year. United reported record-setting weekly ticket sales in early January, and equally strong guidance for the year ahead. Other airlines like Southwest were boasting recent success, and carriers were prepared for a great 2026. The setup was strong and for the right reasons.
Unfortunately for airlines, that excitement faded quickly in the face of multiple significant environmental shocks. War with Iran quickly caused jet fuel prices to shoot up, and companies have seen little to no relief in these prices since they rose in late February. This increased expense is already being reflected in rising ticket prices, hitting customers who are already wary of international travel and concerned about delays in the airport due to the partial government shutdown. For reference, TSA saw average call-out rates above 10% nationwide in late March, with some airports experiencing rates in the 30%-40% range. Airlines reacted quickly, canceling international flights and reducing flight frequency in an effort to avoid increased fuel expenses.
What makes this situation interesting is not the pressure itself, as jet fuel spikes have had similar impacts on the sector historically. What stands out is the difference in how the industry has reacted. Some companies have fought through these headwinds using various strategies and are still expected to meet guidance given at the start of the year. Others are struggling to stay afloat through the conflict, plagued by high cancellation rates and poor operational management that compounds onto the broader issues in the sector. The pressure airlines have faced in past months has revealed the key differences between well-positioned operators with strong business models, and those who are dependent on stable conditions for success.
The Shift to Premium
One of the biggest factors driving resilience and continued growth for some isn’t actually related to the war, but rather a structural shift in the business model altogether. For years now airlines have been slowly turning their focus to premium revenue, which is revenue generated from higher class seating and premium services like lounge access. These tickets provide much stronger margins, and as consumption has continued to rise in past years, some airlines began adapting quickly hoping to make the most of it. According to aviation data firm Visual Approach Analytics, the number of scheduled business and first-class seats on domestic flights has grown 27% since January 2020, which is nearly 3 times higher than scheduled economy seats. The results of this are already showing up in the data. In Delta’s Q4 2025 earnings, it was reported that premium revenue grew 9% YoY to $5.7B and officially overtook main cabin revenue for the first time ever. Other big players are following the same path. United recently announced its new tiered premium fare structure and plans to add over 250 new planes in the next 2 years that are focused on expanding premium capacity. American Airlines plans to increase its premium seating capacity by 30% across all flights and 50% on long-haul flights by 2030.
The shift to premium seating impacts how well airlines are able to absorb cost shocks and weather periods where travel is low. Carriers that focus on economy seating and low prices often cater to a more price-sensitive customer, giving them little room to raise prices before passenger volume begins to drop. These carriers operate on tight margins, making passenger volume crucial in profitability. When higher costs arise, they’re forced to either absorb most of those costs themselves or risk raising prices out of the range their customer base can willingly afford. A carrier whose revenues are more reliant on premium seating is far better fit to handle spikes in cost. They cater more to high-end and corporate travelers who are less reactive to price increases, allowing the operator to more easily pass along higher costs to consumers without disrupting volume. In addition to seating, these airlines are also leaning further into loyalty programs and other specialized offerings to support the shift. Delta reported in its 2025 10-K filing that remuneration from American Express totaled $8.2B for the year, with expectations to grow to $10B over the next few years. By having diverse revenue streams, airlines don’t have to rely so heavily on customer volume and overall travel demand. They’ve transformed their business model into one that focuses on stability, allowing them to grow in a time where others are fighting to survive.
Airline Response to Headwinds
Responses to the issues facing the industry have varied significantly across the board. Those who were already holding a structural advantage prior to the conflict have been able to manage the situation best. For example, Delta has stayed roughly flat since late February while many of its peers are down double digits in the same period. This is largely because Delta purchased its own refinery in 2012, allowing them to process crude oil into jet fuel themselves, providing a material offset to fuel cost especially in a high-cost environment. Despite still facing an estimated $400M increase in jet fuel prices for Q1, Delta raised its first quarter revenue guidance ahead of the JPM industrials conference in March to a range of 7% - 9% from 5% - 7% YoY, sending the stock up 5%. Other players in the sector are finding success through different methods. United reduced its planned capacity by 5% for flights in Q2 and Q3 as the company prepares for higher fuel prices to continue longer term. They also raised fees on checked bags by $10 in an effort to support the rising costs, a tactic being implemented by multiple airlines. United has been more aggressive with their cost-saving measures since they lack the vertical integration needed to support cost stability like Delta does, but they have still seen success in maintaining their guidance over Q1.
One interesting case in particular is Southwest. The airline started 2026 in the middle of a significant operational transformation, adding assigned seats, baggage fees, and segmented seat classes for the first time. After reporting surprisingly strong 2025 earnings in late January, driven largely by the recent changes, investors were quick to reward the stock which shot up over 20%. However, momentum has slowed in recent months as the company tries to handle both rising fuel costs, and operational issues stemming from the transformation. The stock price has since dropped slightly below where it was prior to the 2025 earnings report.
For low-cost carriers, the pressure is proving to be more than they can handle. Spirit Airlines is currently in its second bankruptcy within a single year and has been reduced down to under 100 operating planes focusing on select cities and routes still proving profitable. Frontier’s stock price has fallen over 20% since the Iran war began as they turn their focus to maximizing efficiency by cutting flights and returning leased aircraft. JetBlue raised their checked bag fees by at least $4 in an attempt to offset fuel costs, but the company is already facing financial hardship from multiple years of net losses, and these headwinds are only further delaying a possible return to profitability. These companies are operating business models that have been deteriorating for some time, and the current environment is laying out an increasingly difficult path forward for most of them.
Closing Takeaway
Airlines across the board are feeling the pressures in this sector, but the pressure isn’t what created this divide in the industry, it’s just what revealed it. The carriers that adapted their business models early and diversified their revenues around future stability were prepared and are now reaping the benefits of that careful preparation. These business plans were in the works for years and in some cases were harshly criticized by investors, but these recent challenges gave them the opportunity to prove their value. Investors must realize that airlines are no longer a uniform sector driven by the same economic factors, and that evaluating them requires a deeper understanding of the individual business model.
