The summer travel season is supposed to be when airlines print money. Passengers book months ahead, planes fly full, and fares climb. But this year, an uncomfortable gap has opened between what airlines are reporting and what’s happening at the gate.
The one thing that changed everything
U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, triggering what’s being called the aviation industry’s biggest shock since COVID-19. Jet fuel prices have nearly doubled since the conflict erupted, leaving carriers squeezed between spiralling costs and tickets sold months in advance at prices they can no longer adjust.
Fuel typically accounts for around a quarter of airline operating expenses. Double it, and the business model starts to buckle.
Jet fuel in the U.S. was at $3.51 a gallon this week — down from a peak of $4.78 on April 2, but still far above the $2.39 it sat at on February 27, the day before the first strikes on Iran. Full price analysis can be monitored on IATA.
Why Q1 looks better than it is
Here’s the puzzle. Despite all of that, most major U.S. airlines just posted revenue growth. So what’s going on?
The short answer: Q1 is a delayed snapshot.
Airlines sell most seats weeks or months ahead. The fares locked in for January through March were priced before February 28 and stayed resilient. The fuel shock arrived mid-quarter, but the revenue to absorb it had already been set.
Think of it like a restaurant that locked in ingredient prices before a supply crisis hit. The first week’s menu looks fine. It’s the reprinting of next month’s menu that tells the real story.
Q1 results show a business that hadn’t yet felt the full weight of what hit it.
| Airline | Q1 revenue | Full-year EPS guidance | Outlook |
| United (UAL) | Beat expectations at $14.6 billion | Cut to $7–$11 (from $12–$14) | Most resilient |
| Southwest (LUV) | $7.2B — record | Held at $4 | Stable, domestic-heavy |
| American (AALG) | $13.91B — record | Lower end now a loss | Most exposed |
Reading the numbers: a quick primer
Two figures are appearing in airline earnings coverage right now. Here’s what they actually mean:
- EPS =earnings per share. [Company’s net profit ÷ total shares in circulation = EPS] If an airline earns $700 million and has 100 million shares, its EPS is $7. It’s a standard way to measure profitability that strips out company size, making it easier to compare across carriers or against analyst expectations. > When United cuts its EPS forecast from $12–$14 to $7–$11, that’s not a rounding error — it’s roughly $500 million in expected profit evaporating from the outlook, per share calculation.
- Full-year guidance follows a simpler logic: [What management expected to earn − what the cost shock has changed = revised guidance] Companies set this at the start of the year and update it as conditions shift. A cut means: we expect to earn less than we said. A suspension, as Alaska Air did this week, means something harder to price: we can’t see far enough ahead to give you a number at all. Markets tend to react more severely to suspensions than cuts, because uncertainty is harder to value than bad news, especially for CFD trades.
Together, EPS and guidance updates are how earnings season translates into stock movement.
A company can post strong Q1 revenue and still see its stock fall. The guidance update signals that the good quarter was the exception, not the trend. That’s the dynamic playing out across U.S. airlines stocks right now.
How the carriers are positioned
Q1 revenue records released this week included these airline companies:
United (UAL) beat analyst expectations in Q1, and CEO Scott Kirby confirmed a “strong first quarter”, a signal that its push into premium cabins is holding. Higher-yield passengers are less likely to defect when fares rise, which is precisely the insulation United built.
Southwest (LUV), flying almost entirely domestic and carrying less debt than the network carriers, is the most stable read among the majors right now even if margins lag its more international peers. It held full-year EPS guidance at $4 and is projecting Q2 unit revenue growth of 16.5–18.5% even if CEO Bob Jordan noted “significantly higher fuel costs”.
American (AALG) tells a different story. Q1 revenue hit company record at $13.91 billion, CEO Robert Isom expressing confidence that “even in a volatile operating environment, our pretax margin improved by nearly 2 points year over year”. However, the airline still posted an adjusted net loss of $0.40 per diluted share. Its full-year forecast has been cut, with the lower end now projecting a loss, and its fuel bill is expected to rise by more than $4 billion this year.
Record revenue and a net loss in the same quarter is what a cost structure under genuine stress looks like. When put in comparison, American (AALG) carries more debt and generates less premium revenue than United (UAL), leaving it with fewer levers to pull as Q2 costs arrive in full.
One telling detail: American’s stock rose in pre-market trading after results, as investors reacted positively to losses that were smaller than expected. The bar had been set low enough that missing by less than feared counted as good news. If Q2 guidance disappoints from here, the reaction is unlikely to be as forgiving.
Trade these airline stocks as CFD Shares at VT Markets.
What Q2 and Q3 will show
Q2 and Q3 will carry no such buffer. New bookings are being priced into a different cost environment entirely. Fares are already running about 20% higher than a year ago. Whether passengers, particularly leisure travellers, keep paying that through peak summer is what the next two earnings rounds will actually measure.
The July earnings round is when the picture comes into focus. By then, every forward booking will have been priced after the conflict began. Full-quarter fuel costs will land without the advance-sale cushion that softened Q1. Load factors will reflect whether passengers are absorbing the fare increases or quietly booking less.
A few things to watch:
- Whether hedging positions protected margins through Q2 or left carriers exposed to spot prices
- Load factors on leisure routes, where demand is most price-sensitive
- Any further guidance suspensions — Alaska Air already pulled its full-year outlook entirely
- How U.S. transatlantic routes hold up as European fuel supply tightens Jet fuel supply in Europe
Stay tuned with VT Market’s Earnings Season focus.
For Now
For traders, the divergence between carriers is the most actionable theme.
United and Southwest are better hedged, has stronger balance sheets, and less leverage, the names most likely to hold up if fuel stays elevated.
American and the more indebted carriers carry more downside risk and in balance, opportunities for sharp movement, before the lag between costs and pricing catches up.
A Hormuz resolution would likely reset the sector sharply upward. Continued disruption means more guidance cuts, more dispersion between the stronger names and the weaker ones, and a summer earnings season that makes Q1 look comfortable by comparison. Either way, the next round of Q2 updates, landing in July, will be the first honest reckoning with what this fuel shock actually costs.
The holidays are booked. Whether the profit follows is still very much up in the air.
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Why are airline stocks falling even when passenger numbers are strong?
Passenger demand is holding up, but fuel costs have nearly doubled since the Iran conflict began in late February. Airlines locked in ticket prices months before the fuel shock hit, so Q1 revenue looks healthy — but the cost side has already changed. Strong bookings don’t automatically mean strong profits when fuel is eating through margins. The gap between the two is exactly what Q2 and Q3 earnings will expose.
What does it mean when an airline “suspends guidance”?
It means the company is no longer willing to forecast how much it will earn for the rest of the year. Airlines typically publish a full-year earnings target at the start of the year and update it each quarter. Suspending guidance — as Alaska Air did this earnings season — signal that fuel price volatility makes planning too uncertain to commit to a number. For traders, a suspension often carries more weight than a downward revision, because it removes any floor on expectations.
Why are United and Southwest considered safer than American Airlines right now?
All three posted Q1 revenue records, but their cost structures are different. United has leaned into premium cabin revenue, which is less sensitive to fare increases. Southwest flies mostly domestic routes and carries less debt. American has a heavier debt load, less premium revenue cushion, and a fuel bill expected to rise by over $4 billion this year. When costs spike, the carrier with fewer levers to pull feels it first.
How does the European jet fuel shortage affect U.S. airline stocks?
The IEA has warned that Europe may have around six weeks of jet fuel left, with Middle Eastern supply — previously accounting for 75% of Europe’s jet fuel imports — now largely cut off. For U.S. carriers, this matters because transatlantic routes depend on European fuelling infrastructure. Airlines including SAS have already cancelled over 1,000 flights in April, and Virgin Atlantic’s CEO has said the airline will struggle to turn a profit this year even after adding fuel surcharges. Any further tightening in European supply adds operational risk and cost to U.S. carriers’ most profitable long-haul routes.
Can CFD traders benefit from volatility in airline stocks?
Airline stocks are moving sharply in both directions right now — on earnings beats, guidance cuts, ceasefire rumours, and fuel price swings. CFD trading allows you to take a position on price movement without owning the underlying shares, which means both upward and downward moves can present opportunities. The key risk is that volatility cuts both ways. A Hormuz resolution, for example, could trigger a rapid sector-wide rally, while further disruption could push weaker carriers toward deeper losses. Understanding the difference between carriers — who is hedged, who carries debt, who has premium revenue — helps frame the risk before entering a position.
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