Traveling by plane has become so much more than getting from A to B in the quickest and safest way possible, without much turbulence.
Passengers want legroom, a nice view, and delicious meals, while others want to be able to work smoothly on their laptops while flying.
These demands have fueled fierce competition in the industry, and airlines also need to turn a profit. Amid rising fuel prices, airlines are adjusting their strategies to stay afloat.
American Airlines reported third-quarter earnings results on Oct. 22, revealing 19.3% year-over-year revenue growth, topping the high end of the previously announced guidance range.
In addition to revenue records, the carrier also revealed an important shift in its strategy.
American Airlines says it is prioritizing higher fares over fuller planes
During the third-quarter earnings call, American reported record quarterly revenue of $16.3 billion. Demand was strong across domestic and international markets, and premium travel and corporate bookings performed particularly well.
However, higher ticket revenue did not translate into a profit because of high fuel costs.
“Higher fuel added $1.9 billion to our costs in the third quarter. Nearly 70% more than we paid during the same period last year,” said CEO Robert Isom Jr. during the call.
American also reported an adjusted loss of $0.28 per share, and management projected fuel costs to remain high through the end of the year. It also provided a full-year 2026 adjusted-loss guidance of $1.00 to $1.60 per diluted share.
The carrier also confirmed it has been focusing on higher fares rather than maximum seat occupancy. In airline terms, that means prioritizing “yield” (revenue earned per passenger mile) over “load factor” (the share of seats that are filled).
Its plan is to improve revenue through premium products, pricing, and its loyalty program.
“We were deliberate in how we managed revenue during the quarter. We prioritized yield over load factor, proactively securing meaningfully higher yields in exchange for slightly lower loads,” said Chief Commercial Officer Nathaniel Pieper.
What American Airlines’ focus on higher fares means for travelers
For travelers, the shift is already showing up in ticket prices. U.S. airfares rose an average of nearly 23% year over year in the seven months through September, according to Labor Department data cited by Reuters.
Southwest, for example, said its average passenger fare rose 26.9% to $231.69 in the third quarter, not including fees.
Holiday trips are also impacted. Hopper’s 2026 Holiday Travel Index puts the average domestic round-trip fare at $402 for Thanksgiving, up 31% from last year, and $452 for Christmas, up 23%. Economist Hayley Berg attributes the 10-year highs in part to months of elevated jet fuel costs tied to the conflict in Iran.
Travelers shouldn’t count on relief if fuel prices ease. American Airlines CFO Devon May told the Financial Times on Oct. 22 that if fuel prices drop, fares will probably stay largely where they are.
Flexibility is still the best way to save. In September, Hopper wrote that departing on Monday, Nov. 23, is the cheapest option for Thanksgiving, at about $370 round trip. It also advised avoiding Sunday, Nov. 29, for the return, when fares average as high as $604.
Here’s some of my other recent travel news coverage:
- Delta CEO has firm message for travelers worried about flight safety
- Low-cost airline Wizz Air exits 2 major markets until March 2027
- Marriott finally fixes major pain point for key travelers
Fare strategy shows results on revenue, but has limitations and risks
American’s decision to prioritize yield over load factor reflects a broader shift in the U.S. airline industry, as several carriers are increasingly willing to leave some seats empty rather than discount tickets to fill them.
Five major U.S. airlines generated nearly $8.8 billion more in passenger revenue in the third quarter, an increase of 18%, while passenger traffic grew by less than 1%, Reuters reported on Oct. 23.
So even as higher fares drive much of the industry’s revenue growth, they have not been enough to protect profits from surging fuel costs.
“If fuel stays elevated, we have to continue to push yield up so that we can make a bit of money,” May told Reuters.
This approach also has limits. Higher prices could eventually discourage demand, while flying with fewer passengers can increase operating costs per occupied seat.
Can airlines sustain higher fares?
Today’s pricing strategy could also become harder to maintain in 2027.
Six major U.S. airlines plan to increase domestic capacity by 3.8% in the first quarter of 2027, compared with a 0.2% increase in the third quarter of 2026, according to Airlines for America, citing Cirium data, Reuters highlighted.
If more seats enter the market, competition could intensify and pressure airfares. At the same time, consumers have already faced substantial price increases, raising the possibility that some will cut back on travel.
If capacity grows faster than demand, airlines may have to choose between accepting lower load factors and reducing prices to attract passengers.
Nonetheless, American Airlines’ CFO believes the airline’s “yield gains are very sustainable.”
Related: United’s CEO defends charging travelers extra for a better seat
