I’ve been so focused on Spirit lately, I’ve been neglecting some of the broader industry stories. With Frontier having finally reported its Q1 earnings last week, I decided to take a closer look at revenue and profit performance since all airlines have been crowing about just how great demand has been. While everyone did better compared to last year, there were two who really deserve the gold star for their performance.
Let’s start with a look at adjusted unit revenue in Q1 2026 compared to Q2 2025. This excludes special items.
Now, we can look at this and see there are some airlines that clearly did better than others. But before we do make any judgments, we need to do some work on these numbers. First, I want to normalize for any changes in average stage length. The longer the stage length, the lower your unit revenue. Fares just don’t climb in step with the number of miles flown.
This primarily impacts the airline at the top, Frontier, which saw its average stage drop by nearly 3 points year-over-year. That’s going to artificially boost the number you see there. Allegiant also dropped by 1.7 points. At the other end of the spectrum, American saw its avearge stage climb 1.8 points, so what it looks lower than it should look in a comparison.
So, let’s normalize to a 1,000 mile average stage length to get us looking at apples to apples.
Ok, so now Frontier and Allegiant come down a little while American goes up. We now have a much more complete picture, but… there’s still one piece missing. What we don’t have here is any indication of how much capacity changed for each airline year-over-year. If capacity goes up, that should put a damper on unit revenue. If capacity goes down, that will help bolster unit revenue.
I’m not adjusting the numbers for this, but instead I’m just putting the capacity change on the chart in a separate series to help put things into perspective. Here is what the final picture looks like:
What does this tell us? The ULCCs had a very good quarter. Both Allegiant and Frontier saw massive gains in unit revenue, though it’s not quite as impressive once you see the decline in capacity. That’s especially true for Allegiant which operated nearly 6 percent less capacity year-over-year. But then again, you could adjust for that, and you’d be hard-pressed to say it wasn’t a good quarter.
Southwest, however, is a different story. It was the only airline to increase capacity and have double-digit unit revenue increases. Yes, it has changed its business model and that makes a huge difference. But these gains are very good, and Q2 is expected to see even greater growth. Of course, we don’t know if the model change will cause more problems for Southwest in the long run, but for now, the revenue news is all good news for the airline.
Below that, we have the big three. American saw the most impressive gains of that group, but the differences are relatively minimal. At the back, we have JetBlue and Alaska which definitely underperformed. Alaska is still digesting its merger with Hawaiian and making its big strategic shifts. JetBlue is just fighting in tougher markets.
Of course, revenue increases don’t translate directly into profit, so let’s go a little deeper here. Take a look at the operating margin for each of these airlines in the same order they were shown above.
Well that does change things, doesn’t it? Frontier may have had good revenue performance, but its profitability is… not good. Allegiant absolutely crushed it once again. But look at Southwest which quietly tied Delta for the best operating margin outside of Allegiant after losing money last year in the same quarter. That is a huge change.
With all that data, what do we learn? There are some smaller takeaways, but the key here is that both Allegiant and Southwest are sitting at the top of the heap.
