The JP Morgan Industrials Conference was held this week, and that’s the place to watch for airlines to lay out how the business is trending as Q1 comes to a close. With the war continuing in Iran, and oil prices spiking, you’d think the airlines would be preparing to batten down the hatches, but you’d be wrong. Airline after airline kept mentioning just how great everything is.
What it comes down to is this… demand is through the roof. Every single airline that took the stage was beaming that the numbers are much better than expected. Just look at some examples:
- Delta had 8 of its 10 highest sales days in Q1
- American had 8 of its 10 highest sales weeks in Q1
- United’s first 10 weeks of 2026 were also its 10 highest sales weeks
This isn’t just at the top of the chain either. JetBlue raised its revenue guidance for Q1 from being flat to up 4 percent all the way up to now being up 5 to 7 percent. Frontier expected stage length-adjusted unit revenue to be up 10 percent. It’s now going to be up in the mid-teens.
Though Delta CEO Ed Bastian said Delta is in good shape because it serves the high-end traveler who is less impacted by economic pressure — it’s that K-shaped economy which apparently doesn’t bother him — Southwest CEO Bob Jordan confirmed that this trend isn’t just limited to a specific part of the business.
That strength is in all geographies. It’s across all fare structures, it’s across business, it’s leisure, and as far as we have visibility, that demand strength is across all forward months
Andrew Watterson, COO of Southwest, dropped this stunning number. If Southwest didn’t receive another dollar of corporate bookings after last Friday, March would still be its biggest corporate month ever. That’s only halfway through the month!
It’s the 1920s all over again. Times are good, what could possibly go wrong?
Undoubtedly the airlines are all preparing for what could happen, but I often look to United to tell the real story here. As was the case during COVID, United has generally been more conservative (and right) in where it thinks the business could go. Of course it hopes for the best, but as the saying goes, it plans for the worst.
So, when United CEO Scott Kirby took to the stage toward the end of the day, I was listening closely. Is he concerned that oil is running up toward $100 a barrel so quickly? It’s even more pronounced for the airlines since jet fuel itself has spiked even more.
As usual, Scott turned to numbers to help explain his airline’s view of the world.
Yes, higher oil isn’t ideal, but United — and it seems much of the industry — is on its way to being able to recoup that extra cost thanks to strong demand. In other words, fares are going up, and people are still buying tickets.
At United, Scott said the oil price run-up has added about $4.6 billion in cost. This number can change if prices fluctuate, but for United to cover that, it needs to increase its unit revenue by 8.5 points. That’s a hefty increase. But Scott points to more numbers to show that it is happening. In the last week before he spoke, booked yields are up 15 to 20 percent. Fares are climbing very quickly to offset the cost increase. Now, that doesn’t mean it gets to an 8.5 point increase in the end once all is said and done, but it is a very realistic possibility.
The way Scott sees it, this is just delayed inflation finally reaching airfare, and that’s why it’s being accepted by the public. He points out that while inflation in the US was up by about 25 percent from 2019 to 2025, fares were down 2 percent. So there is room for airfare to catch up without pushing people away in droves as would normally be the case.
Still, Scott says United is being conservative, and it has already cut capacity by about one percent in May and June. This is off-peak flying that performs the weakest, but by cutting supply, it can help bolster fares. Other airlines are wavering on making cuts until there’s more data on what’s happening. Even United doesn’t think it needs to do this now, but it wants to be conservative in case things do turn worse. As United sees it, it’s worth the minor loss of revenue on those flights if things don’t get much worse in order to prevent a bigger loss if things go in the opposite direction.
Fortunes, of course, change dramatically if oil continues to shoot up and prices stay high for a long time. This looks increasingly likely as the war drags on. But Scott says that they’ve even run up scenarios where oil hits $175 a barrel, and United can still grow its profit margins. It’s far from a guarantee, but the idea that this is even a possibility shows how much the industry has structurally changed.
I suppose I should narrow that to say that “part” of the industry has changed. You still have the ultra low-cost operators trying to find a strategy that works. Frontier will lose money in Q1 and it will be at the lower end of its previous guidance even with the strong revenue guidance. American is losing money in Q1 as well as it continues to try to become like Delta and United despite being well behind. It isn’t cutting capacity, which may seem like an odd choice. I guess it’s easy to play to the upside with all the euphoria that’s sweeping the industry right now.
There is a lot of uncertainty right now, but somehow the airlines aren’t feeling it nearly as much as they have in previous times of crisis. It’s all sunshine and rainbows… until it’s not. It’s just a matter of time.
Want to hear more about the JP Morgan conference? Brian, Jon, and I spent this week’s episode talking about the big picture but also some other bits and pieces which caught our eyes. This should be live before this post goes out, but if it’s not, check again later today.
