Analysts Slash 2026 Revenue Outlook for U.S. Airlines Amid Rising Costs and Weakening Demand
Investment analysts are significantly lowering their expectations for U.S. airline performance in 2026, citing surging fuel prices and signs of weakening travel demand ahead of the upcoming earnings season.
Major carriers including Delta Air Lines, United Airlines, Southwest Airlines, and American Airlines are set to report first-quarter results this month, with Delta leading on April 8.
J.P. Morgan Flags “Worrisome” Demand Slowdown
In a recent report, analysts at JPMorgan Chase warned that profitability expectations for 2026 have “largely been dashed” for most airlines.
According to analyst Jamie Baker, only Delta and Southwest appear well-positioned to maintain profitability, while United ranks slightly behind.
A key concern is a noticeable drop in late-March travel spending, based on credit card data. Analysts observed a “worrisome deceleration” in airline-related purchases, suggesting that demand may be softening due to:
- Economic uncertainty
- Rising ticket prices
- Consumer spending pressures
Fuel Prices Surge, Pressuring Profitability
Fuel costs remain the biggest challenge for airlines in 2026.
J.P. Morgan estimates:
- Q2 jet fuel price: ~$4.80 per gallon
- Second half of 2026: ~$4.90 per gallon
This marks a sharp increase from:
- Just above $2 per gallon at the start of the year
- Around $2.50 before the Iran war
Analysts say airlines will struggle to fully offset these costs through higher fares, putting pressure on margins.
Earnings Forecasts See Dramatic Cuts
J.P. Morgan has sharply revised its earnings expectations:
- Delta Air Lines: EPS cut to $0.15 (from $7.05)
- United Airlines: Now expected to post a loss of ~$1 per share (down from a projected $13.82 profit)
These revisions highlight the rapid shift in outlook within just a few weeks.
Deutsche Bank Also Lowers Expectations
Analysts at Deutsche Bank have also downgraded their forecasts, though less aggressively.
According to analyst Michael Linenberg:
- Projected industry profit: $11.5 billion (down from $20 billion)
- Revenue forecast: $270 billion (up slightly from $255 billion)
- Profit margin: ~4%
Fuel costs are expected to surge significantly:
- New fuel cost estimate: $72 billion
- Previous estimate: $47 billion
To fully offset this $25 billion increase, airlines would need to raise average one-way fares by about $31—a level analysts believe is unlikely.
Mixed Outlook on Demand Recovery
Despite the challenges, Deutsche Bank maintains a relatively more optimistic stance on demand compared to J.P. Morgan.
Linenberg expects:
- Airlines to generate $15 billion more revenue than previous estimates
- Recovery of 40–50% of added fuel costs in the current quarter
- Up to 75–80% cost recovery by Q4 through pricing and operational strategies
The Bottom Line
The outlook for U.S. airlines in 2026 is becoming increasingly uncertain. While demand remains relatively resilient, rising fuel costs and economic pressures are eroding profitability expectations.
As earnings season unfolds, investors will be watching closely to see how airlines balance pricing, capacity, and costs in a volatile environment.
