US Airlines: Can Delta, United, and American Pass Through the Oil Shock Before It Breaks Them?

We are launching primary research to determine whether US carriers can pass through a wartime fuel spike to consumers without destroying the demand recovery that underpins every 2026 earnings forecast in the sector.

Two months ago, the three largest US airlines entered 2026 with the most optimistic earnings outlooks in years. Delta projected 20% profit growth. United guided to over $12 in earnings per share, its best year ever. Even American, the perennial laggard, promised nearly $2 of earnings improvement. All three forecasts shared a single critical assumption: that the benign fuel environment of 2025 would persist. Then the US and Israel struck Iran on February 28, oil spiked to $119 a barrel, and the assumption collapsed.

The numbers illustrate how quickly the economics have shifted. Jet fuel now averages $2.83 per gallon according to the Oil Price Information Service, up from roughly $2.25 in the quarters that informed 2026 guidance. Delta disclosed in its annual filing that a one-cent increase in the cost of jet fuel per gallon adds approximately $40 million to its annual fuel expenses. For American, the figure is $50 million per penny. For Southwest, $22 million. At current spot prices, a 50-cent-per-gallon increase translates to roughly $2 billion in additional annual fuel costs for Delta alone. None of the three carriers have publicly updated guidance to reflect it.

Bears see the setup they have feared since the post-pandemic earnings boom began: an unhedged industry walking into an exogenous cost shock with no contractual protection and a consumer who may be unwilling to absorb surcharges. Deutsche analysts warned that absent near-term relief, airlines around the world could be forced to ground thousands of aircraft, while some of the industry's financially weakest carriers could halt operations entirely. The same note drew a direct parallel to the 2005 post-Katrina fuel spike that sent Delta and Northwest into Chapter 11 bankruptcy.

Bulls counter that 2026 is not 2005. The industry is structurally healthier, with concentrated profitability among the top three carriers, premium revenue streams that barely existed two decades ago, and capacity discipline that supports pricing power. Reuters analysts noted that airlines catering to business travellers and premium cabins stand a better chance of pushing through fuel cost increases compared to carriers serving budget-conscious leisure customers. The question is whether that structural advantage survives a wartime oil shock of this magnitude and duration.

The catalyst window is tight. Delta and United are both scheduled to present at J.P. Morgan's Industrials Conference on March 17. Whatever language these management teams use about demand trends, pricing actions, and cost mitigation in the next seven days will set the tone for the sector into Q1 earnings in April. The market needs to know whether revenue management desks are already loading fare increases, whether corporate travel budgets are being pulled back, and whether the unhedged cost structure of the US airline industry is a manageable vulnerability or a fatal one.

Key Insights

All three carriers built 2026 guidance on fuel costs that no longer exist. In 2025, Delta's fuel expense fell 7% year-over-year, with quarterly fuel prices as low as $2.25 per gallon. Morningstar now expects fuel prices to remain elevated for some weeks and models an average kerosene price of $2.80 per gallon in Q2 2026, up from previous estimates around $2.30. That roughly 50-cent swing per gallon represents billions in unbudgeted cost across the three major carriers, and not one of them has publicly revised its outlook.

US airlines are functionally unhedged, and the asymmetry is stark. Some major Asian and European airlines have oil hedging in place, but US airlines largely abandoned the practice over the past two decades. A spokesperson for British Airways owner IAG confirmed it was well-hedged for the immediate future and had no plans to change ticket prices. This creates a direct competitive asymmetry on transatlantic routes that the market has not yet fully priced.

The premium revenue shield is being tested for the first time at scale. Delta CEO Ed Bastian noted in January that almost 60% of Delta's revenue is now tied to premium offerings, loyalty programmes, and non-ticket streams. Premium revenue grew 7% in 2025, and American Express remuneration grew 11% to $8.2 billion. The bull thesis rests on these diversified revenue streams insulating margins from fuel volatility. But this thesis has never faced a wartime oil shock.

American Airlines is the most exposed carrier, and it was already weakest coming in. American guided FY2026 adjusted EPS of $1.70 to $2.70, the thinnest margin of safety among the three. Rothschild & Co Redburn now expects American to report negative earnings per share this year and cut its price target to $12.50 from $17. American carries $36.5 billion in total debt, and each penny of fuel increase costs it $50 million annually. Its Q4 miss and government shutdown exposure left it entering the crisis from a position of weakness.

TD Cowen's Q1 estimate for United illustrates the severity of the earnings risk. TD Cowen estimated United's Q1 EPS in a range of 5 to 22 cents at current jet fuel prices, against United's own January guidance of $1.00 to $1.50. That is an 85 to 95% reduction in quarterly earnings from guidance, in a single quarter, from a single cost variable. TD Cowen's Tom Fitzgerald said plainly: the airlines can likely recapture a portion of the fuel spike, but margin expansion this year is hard to envision without a rapid decline in energy prices.

Since February 28, more than 40,000 flights to and from the Middle East have been cancelled. According to Cirium data, the disruption is not theoretical. It is operational, measurable, and accelerating. Some jet fuel prices have doubled since the start of the conflict, piling pressure on carriers already navigating tightened airspace and altered routing.

Participation Opportunity

Woozle Research is inviting professional investors to sponsor or co-sponsor this primary research. Participation is collaborative. All funds receive full access to research outputs including interview summaries, transcripts, and the final synthesis report.

Launch: March 14, 2026 Delivery: March 28, 2026 Participation cap: Limited to 5 funds

Research scope: 30+ airline revenue management and pricing channel checks, 15+ corporate travel manager interviews, 15+ fuel procurement and hedging desk contacts, 10+ competitor and industry analyst interviews

Deliverables: Raw data, transcripts, synthesis report, analyst access

This research will proceed with a minimum of one fund and is limited to a maximum of five. Email to confirm your interest.

The Catalyst

For a decade, the US airline industry told investors a story about structural transformation. The legacy carriers had learned from their serial bankruptcies, consolidated into a disciplined oligopoly, and built premium revenue engines that generated durable profits across cycles. Delta became the luxury brand. United became the global network. American became the turnaround candidate. All three leaned into loyalty programmes, co-branded credit cards, and premium cabin products that diversified their revenue beyond the volatile economics of filling economy seats with fare-sensitive leisure travellers.

The story was persuasive, and the numbers backed it up. Delta achieved record revenue of $58.3 billion for full-year 2025. United's total operating revenue grew 3.5% year-over-year to $59.1 billion, the highest in its history. American posted record fourth-quarter revenue of $14.0 billion and record full-year revenue of $54.6 billion. All three carriers entered January with earnings growth targets above 20%. The question was not whether the airlines would deliver. It was how much upside they could capture. Then the bombs fell.

The US-Israeli strikes on Iran that began February 28 did not just create geopolitical uncertainty. They created a commodity shock. Oil prices jumped 20% in early trading on March 9, hitting their highest level since July 2022 amid fears of tighter supply and prolonged disruptions to shipments. The disruption to Middle East routing is adding cost pressure beyond fuel. Carriers are flying longer routes, burning more fuel, and losing the scheduling efficiency that supports margin. The more troubling dynamic for US carriers specifically is the hedging gap. US airlines rely less on hedging than their European and Asian rivals, making their earnings materially more sensitive to crude price movements than most of the global competition.

Delta stands out among US carriers with its Monroe refinery outside Philadelphia, which covers close to 200,000 barrels per day — roughly 75% of what Delta burns — insulating it from refining markups. But as Delta has acknowledged, the refinery does not shield it from crude price movements. United and American have no comparable structural hedge. They are fully exposed. CEO Ed Bastian struck a notably cautious tone even before the conflict, telling reporters in January: "we're not going to project or commit to a record earnings forecast until we understand the uncertainty." That caution now looks prescient. United CEO Scott Kirby, meanwhile, has been more forward-leaning, recently suggesting that higher airfares could be ahead following the fuel spike. The difference in tone between the two CEOs may reflect a deeper strategic divergence: Delta protecting load factors and brand positioning, United willing to test price elasticity in a market that may not yet know how sensitive it is.

The more troubling narrative is what happens to the bull thesis if premium demand cracks. The entire investment case for Delta and United over the past three years rested on the idea that their customer base — affluent, brand-loyal, experience-driven — was insulated from macro volatility. Corporate travel managers at Fortune 500 accounts may agree in principle. But corporate travel managers also operate inside finance teams that are simultaneously navigating tariff uncertainty, softening growth forecasts, and tighter discretionary budgets. A fuel surcharge is an easy justification for a travel policy review. If that review results in reduced flying, the premium yield engine that underpins both carriers' 2026 guidance takes a hit that fare increases alone cannot compensate for.

Rothschild analysts wrote that United and Delta have less sensitivity to the fuel shock and maintained positive views on both, while downgrading American outright. The market is already segmenting winners and losers within the group. The J.P. Morgan Industrials Conference on March 17 is the first public forum where management teams will address the shock directly. Q1 earnings land in mid-April. By then the market will have the public data. Primary research can deliver the answer weeks earlier.

Key Intelligence Questions

The research will focus on the commercial and operational dynamics that determine whether US airlines can defend their 2026 earnings guidance through fare increases and demand resilience, or whether the fuel shock forces a fundamental reset of sector expectations.

Fare Pass-Through: Are Revenue Management Desks Already Raising Prices?

The central question in the investment case is whether airlines can offset higher fuel costs with higher fares. Historically, carriers have been able to pass through fuel increases during periods of strong demand, but those limits depend on the competitive environment, consumer confidence, and the pace of the increase. Asian and European carriers moved first. Qantas, SAS, and Air New Zealand announced airfare hikes within days. Hong Kong Airlines raised fuel surcharges by up to 35%. But US carriers have been conspicuously silent on domestic pricing actions.

The question is whether revenue management teams at Delta, United, and American are quietly loading fare increases into forward bookings, absorbing the cost in hope of a reversion, or holding fares to protect load factors in a softening demand environment. The distinction matters enormously. A carrier that raises fares 10% on a route where demand is elastic loses volume and margin simultaneously. A carrier that holds fares while fuel is 30% above budget bleeds cash. Revenue management directors at each of the three major carriers, along with pricing analysts at Southwest and JetBlue, could reveal whether domestic fare structures have moved in the first two weeks of the conflict, at what magnitude, in which markets, and with what impact on forward booking velocity.

Corporate Travel: Is the Enterprise Customer Pulling Back?

Premium and corporate revenue has been the defining advantage of Delta and United over the past three years. Diversified revenue streams now represent 60% of Delta's total revenue. United's full-year 2026 EPS guidance of $12 to $14 implies over 20% growth, driven in part by premium cabin strength and brand-loyal customers. American reported that systemwide revenue intakes for the first three weeks of 2026 were up double digits year over year. But those trends were measured before the conflict escalated.

The bear case centres on a scenario where corporate travel managers, already navigating tariff uncertainty and economic softness, use the fuel spike as a trigger to tighten travel budgets. Corporate surveys heading into 2026 indicated roughly 90% of companies expected travel volume to increase or remain steady. The question is whether that sentiment has shifted in the ten days since the Iran strikes began. Corporate travel managers at Fortune 500 accounts — particularly in financial services, consulting, and technology, where discretionary travel is highest — could indicate whether budget freezes or travel policy changes are being implemented. This is the single most important demand-side variable in the airline investment case, and it is not visible in any public data set.

Fuel Exposure: How Asymmetric Is the Pain Across Carriers?

The market is already differentiating between Delta, United, and American on fuel sensitivity, but the quality of that differentiation is low. The logic is straightforward: American has the weakest earnings base, the highest absolute debt load, and the largest per-penny fuel cost sensitivity at $50 million annually. But the picture is more nuanced than headline sensitivity numbers suggest. Delta's Monroe refinery provides a structural advantage on crack spreads, but not on crude. United's fleet renewal programme includes newer, more fuel-efficient aircraft that could provide a marginal per-ASM cost advantage. American's older fleet and higher debt service create a compounding disadvantage when fuel rises.

Fuel procurement contacts at each carrier, along with refinery operations managers at Monroe and independent jet fuel brokers on the Gulf Coast, could quantify the true per-gallon cost differential between the three airlines under current market conditions. That differential is what determines whether the market's current risk-off positioning in American and risk-on positioning in Delta is correctly calibrated, or whether the spread has been mispriced in either direction.

Demand Elasticity: Where Does the Consumer Break?

The airline industry's recent history provides mixed signals on demand elasticity during fuel shocks. Travel demand has been remarkably resilient in the post-pandemic period, with consumers consistently prioritising experiences over goods. Bastian has described Delta's positioning at the top of the K-shaped economy, with more revenue coming from higher-spending customers. But two consumer cohorts are now under pressure simultaneously — affluent travellers booking premium cabins who may absorb a 10 to 15% fare increase without changing behaviour, and price-sensitive leisure travellers on American's domestic network who almost certainly will not.

The question is not whether demand softens. It almost certainly will at the margin. The question is where it softens, how fast, and whether the premium segments that drive airline profitability are insulated. Travel agents specialising in premium leisure and corporate bookings, along with OTA revenue managers at Expedia and Booking Holdings, could provide the granularity the market lacks. The investment implications are asymmetric: if premium demand holds while economy softens, the trade is long Delta and United, short American. If premium demand cracks, the entire sector re-rates lower.

Capacity Response: Will Airlines Cut Flying to Protect Margins?

The final variable is supply-side discipline. In past fuel spikes, airlines responded by cutting unprofitable routes and reducing capacity to support yields. The question is whether the current management teams will act pre-emptively or wait until the damage is visible in quarterly results. Delta entered 2026 with what it described as a favourable capacity position. United plans to take delivery of over 100 narrowbody and approximately 20 widebody aircraft in 2026, its most aggressive fleet expansion in decades. American was planning capacity growth of 3 to 5% in Q1.

Network planning executives at each carrier, along with airport operations managers at key hubs like Atlanta, Chicago O'Hare, and Dallas-Fort Worth, could indicate whether schedule reductions for summer 2026 are being discussed or implemented. If carriers are cutting, it signals margin discipline but growth deceleration. If they are maintaining schedules, it signals a bet on demand resilience that may or may not pay off. Either path has distinct implications for the earnings trajectory, and the market cannot see the internal planning decisions until they are publicly filed.

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