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Fewer people are flying, but airlines aren't worried
CNBC • • business
Key Points:
- U.S. air travel is seeing its first annual decline in passenger numbers since 2020, with airlines prioritizing higher fares over filling planes to capacity amid rising jet fuel costs.
- Airfares have surged over 22% compared to last year, driven by increased fuel prices and additional fees, as seen with Southwest Airlines' average fare rising nearly $50 in the third quarter.
- Despite fewer passengers, airlines like Southwest and United report that both fares and passenger volumes have exceeded expectations, with United experiencing a 2.4% increase in passengers and a 16% rise in unit revenue.
- Airlines are focusing on premium cabin demand, which remains robust and more profitable, while some carriers have cut profit forecasts and growth plans for 2026 due to sustained high fuel prices.
- Reduced capacity and strong demand for premium seats are expected to keep airfares elevated, as airlines leverage pricing power to offset fuel cost increases and aim for improved profit margins.
