Oil Prices Soar and Shake the Aviation Industry; Analysts Warn: US May Only Have Three Airlines Remaining That Can Profit

Cailian Press, March 13 (Editor: Xia Junxiong) Wall Street analysts warn that as the war with Iran escalates and pushes up oil prices, U.S. airlines could face severe profit squeezes.

In recent years, many U.S. airlines have largely abandoned fuel hedging strategies, making them more vulnerable to sudden oil price spikes. This also means that at current oil price levels, only a few airlines may still be able to remain profitable.

Affected by the U.S.-Iran conflict, international oil prices remain high. As the global benchmark, Brent crude has surged about 38% this month, currently trading below $100 per barrel.

Fuel typically accounts for about 15% or more of airline operating costs, so price fluctuations hit them especially hard.

Markets are increasingly concerned that raising ticket prices significantly to offset fuel costs could suppress consumer travel demand, especially among price-sensitive leisure travelers. In fact, as Middle East tensions escalate, airline fuel prices have soared from about $85 per barrel to a peak of around $200.

Airlines and oil producers usually rely on hedging strategies to manage sharp oil price swings. By using futures, swaps, or options, airlines can lock in fuel prices to prevent sudden oil price increases from rapidly eroding profits.

Typically, airlines hedge up to two-thirds of their expected fuel consumption about six months in advance. European and Asian airlines tend to be more active in fuel hedging than their U.S. counterparts.

Only three U.S. airlines barely profitable

According to UBS analyst Atul Maheswari, if fuel prices stay at $4 per gallon or higher, only Delta Air Lines, United Airlines, and Southwest Airlines are able to achieve “slim profits” in the U.S.

Maheswari pointed out that while these three airlines may still remain profitable, most other major airlines are expected to struggle to make money at current oil prices, with many possibly facing significant losses.

Delta and United are less sensitive to fuel price shocks, mainly because they have higher operating profit margins. These airlines have long benefited from a so-called “K-shaped” demand structure, where high-end business travel remains strong, allowing them to maintain higher profit margins than low-cost carriers during cost surges.

Additionally, these airlines are more able to pass higher fuel costs onto passengers through ticket price increases and fuel surcharges.

Southwest Airlines, despite being one of the largest low-cost carriers in the U.S., still has some downside protection.

Southwest has historically adopted a more aggressive fuel hedging strategy to manage oil price volatility. Since adopting hedging tools during the Great Depression, its hedging programs have saved significant costs. However, there are reports that in a lower oil price environment in 2025, the company slowed its hedging activities.

Furthermore, Southwest manages fuel costs through various means, including using more fuel-efficient fleets, improving operational efficiency, and introducing sustainable aviation fuels (SAF).

(Cailian Press, Xia Junxiong)