MW Airline stocks drop, but worries over rising fuel prices haven't hurt travel demand yet
By Tomi Kilgore
A surge in oil prices amid fears that the Iran conflict will escalate has renewed investor worries how rising fuel costs will hurt airline profits
Airline stocks were falling amid renewed worries about rising fuel costs, and how that could eventually hurt travel demand.
Airline stocks were taking a beating in early Thursday trading, as a jump in crude-oil prices renewed investors' worries that earnings will take a hit from rising fuel prices.
While there is still no sign that travel demand in the U.S. has been impacted by the Iran war - as well as the chaos at airports caused by the continued partial government shutdown - that's because travelers haven't felt the full impact of higher fuel costs, at least not yet.
Meanwhile, airline investors were given a reprieve over the past couple of days from the recent selling, as hopes for a sooner-than-later resolution to the Iran conflict sent oil prices falling. But after President Donald Trump warned late Wednesday of an escalation to the conflict, oil was back to its upward trend.
The U.S. Global Jets ETF JETS dropped 4.1% in recent morning trading Thursday, after surging 6.9% over the previous two days. Crude-oil futures (CL.1) climbed 12.1% early Thursday, after losing 5.8% the past two days.
In March, the Jets ETF had tumbled 13.4%, the worst monthly performance in a year, while crude futures soared 51.3%.
Shares of United Airlines Holdings $(UAL)$ slumped 6.6% Thursday morning; American Airlines Group's stock $(AAL)$ shed 6.5%; and Delta Air Lines shares $(DAL)$ were down 4.6%.
Melius did a study of a "high frequency, highly competitive domestic leisure route" to see how the recent increase in fuel prices might affect air carrier profits.
Melius Research analyst Conor Cunningham wrote in a Thursday note that, before the Iran conflict started, a typical 737-800 flight for that route would generate about $1,500 in operating income. At current prices, that route has swung to a loss of $3,900 per flight.
"The math is straightforward," he wrote, as fuel costs have nearly doubled while nonfuel costs and revenue are largely fixed, "locked in by bookings made before the conflict began." While some recent $10 fare hikes have been implemented to stem the losses, he said that's not nearly enough.
"[T]he numbers here make a compelling case: prices need to keep rising, or more forced change will come," Cunningham wrote.
Despite all the airport and flight cost drama, travel demand actually increased in March.
TD Cowen analyst Tom Fitzgerald said overall air-carrier traffic in March was up 1% from a year ago, which outpaced the 0.5% increase in available seats.
Data from the Transportation Security Administration showed that a total of 78.54 million travelers were screened at security checkpoints in March, up from 77.23 million a year ago.
Despite these encouraging numbers, Fitzgerald wrote that "the likelihood of a prolonged period of higher energy prices" has investors worried that rising prices will eventually hurt travel demand. As a result, he has lowered his earnings estimates for the major air carriers and trimmed his stock price targets.
Delta Air Lines will kick off earnings-reporting season for the airlines on April 8. The average analyst estimate compiled by FactSet for first-quarter earnings per share is currently 60 cents, up from 46 cents a year ago, but down from a consensus estimate of 70 cents at the end of February.
-Tomi Kilgore
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April 02, 2026 09:46 ET (13:46 GMT)
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