US Majors: Reasonable Financials but Consumers Doubtful
Jan/Feb 2026
For the big three US network airlines, 2025 was a year that did not quite live up to optimistic expectations. Consumer sentiment showed a marked decline on the inauguration of the new administration, and overall market demand was affected by the Trump tariff roller-coaster. A fatal American Eagle crash into the Potomac in January, and a Delta Connection crash on arrival in Toronto in February might not have helped.
Then there was a six-week government shut-down from the beginning of October with severe knock-on effects for the industry as air traffic controllers and TSA security worked without pay (or didn’t, and called in sick) leading to widespread flight disruptions and an FAA-mandated 10% cut to schedules at major airports. For the year as a whole, total domestic passenger numbers fell by 1.3% year on year — unusual in the absence of a technical recession. US GDP grew by 2.1% over the year, but the domestic passenger revenues of the top three carriers grew by a mere 1%.
On international services, Form 41 data shows the US airline industry as a whole saw minimal growth of 0.2% in the total number of passengers. The top three managed a 2% increase between them (offsetting the steep declines at LCCs Frontier and Spirit of -17% and -22% respectively). The weakness in inbound tourist arrivals noted by the ITA may have had a little to do with it (see next article), although for the top three over 80% of their international tickets have a US point of sale.
| $m | Domestic | Atlantic | Latin America | Pacific | Total |
|---|---|---|---|---|---|
| American | |||||
| Pax Revenues | 35,201 | 6,583 | 6,440 | 1,415 | 49,639 |
| Pct of total | 71% | 13% | 13% | 3% | |
| Y-on-Y %ch | -0.4% | 1.5% | -1.8% | 13.7% | 0.0% |
| Unit Revenue∗ | -2.90% | 0.80% | -2.80% | -0.10% | -2.00% |
| Demand† | 0.30% | 3.10% | -1.20% | 13.60% | 0.60% |
| Delta | |||||
| Pax Revenues | 35,731 | 9,270 | 3,980 | 2,787 | 51,768 |
| Pct of total | 69% | 18% | 8% | 5% | |
| Y-on-Y %ch | 1.4% | 1.5% | -0.4% | 9.7% | 1.7% |
| Unit Revenue | -2.0% | -2.0% | -1.0% | 0.0% | -2.0% |
| Demand | 0.0% | 2.0% | 0.0% | 16.0% | 1.0% |
| United | |||||
| Pax Revenues | 31,487 | 10,872 | 5,077 | 6,003 | 53,439 |
| Pct of total | 59% | 20% | 10% | 11% | |
| Y-on-Y %ch | 2.0% | 4.9% | 1.4% | 7.5% | 3.1% |
| Unit Revenue | -4.1% | -1.6% | -5.2% | 3.0% | -2.9% |
| Demand | 3.9% | 5.7% | 4.8% | 9.4% | 5.1% |
Delta again produced the best margins, the cleanest strategic narrative and the most convincing balance between growth and returns. United extended its multi-year run of outperformance, showing that its bet on network breadth, premium segmentation and operational reliability is producing structurally higher earnings power than sceptics once believed. American, by contrast, remained (just) profitable but still looked like the least strategically coherent of the three: more dependent on the comestic market, less margin-rich than Delta, less momentum-driven than United, and still working through the consequences of a revenue strategy that had to be reset.
The headline numbers tell the story. Delta reported adjusted operating income of $5.8bn (-3.5% y/y), a 9.2% margin (-60bp) on revenues of $63.3bn (+2.8%). It achieved net profits of $3.5bn, a gnats whisker below those reported for 2024. Management framed the year as “challenging”, but one of “durability”, with record revenue and a double-digit return on invested capital.
United’s 2025 results were also reasonable. It reported full-year revenue of $59.1bn (+0.8%), adjusted operating profits of $5.0bn (-4.5%) giving an operating margin of 8.4% (-50bp) and net profits of $3.5bn, just 1.2% down on the prior year. Management stressed that the carrier had exceeded expectations and was seeing the benefits of “brand-loyal” customer growth, a more reliable operation and stronger revenue diversification.
American also saw revenues rise by 0.8% to $54.6bn. Operating profits however were 50% lower than in 2024 at $1.6bn, giving a margin of 3.0% compared with 6.0% in the prior year. Net profits were effectively a break-even at $237m (-83%). American remains the most indebted of the three but paid off $2.1bn of its debt pile ending the year leaving it with gross debt of $36.5bn (and net debt of $30.7bn) and a ratio of net debt to EBITDA of 11x. On publication of the results, CEO Robert Isom emphasised that American “is positioned for significant upside in 2026 and beyond”. Strategically, the carrier is still heavily dependant on domestic and short-haul demand without the same valuation of product and network advantages that investors now readily assign to Delta and United.
Optimism reigned in each carrier’s outlook for 2026 highlighting very strong booking trends at the start of the year. Delta guided to full-year margin expansion and earnings growth of around 20%. United equally pointed to a 2026 increase of over 20% in net income. American expected that it could return to the 2.5% net operating margin it achieved in 2024.
Product segmentation and “Premiumization”
In the last decade the top three have shifted from operating simple cabin classes (coach and first) to a segmented “branded fares” product. Delta kicked off in 2012 with its basic economy fare to try to compete head on with the new generation of low cost carriers. (It was originally launched as a “Spirit-match” fare). It came with the same restrictions as the LCC’s unbundled offering: no frills, no seat assignment, no baggage allowance. American and United followed suit in 2017, at the same time that Delta expanded its offering to four/five tiers of branded fares: First class (or Business on international long haul), premium economy, featuring wider seats, higher seat pitch and enhanced service, Comfort+ — seats in the main cabin with 3-4 inches more leg-room — as well the run-of-the-mill main cabin and Basic Economy for the bums on the seats at the back of the bus.
This development has accelerated in the recovery from the pandemic and has been particularly beneficial to Delta and United. In the fourth quarter of 2025 revenues from Delta’s branded tickets exceeded main cabin income (the former up by 7%, the latter down by 7%).
United has adopted the strategy whole-heartedly and its premium revenues were up by 11% for the full year compared with a 5% growth in basic economy. CEO Scott Kirby insists: “we’ve proven that air travel is not a commodity”. The airline is significantly increasing its premium offering aiming for the highest premium seat count of any US widebody aircraft. It is rolling out what it calls its “elevated” interior on the 20 787-9s being delivered in 2026: 64 lie-flat Polaris business suites (up from 28) designed with “privacy doors” (that currently have to be locked open until they recieve certification) including eight new over-sized “Polaris Studios” in the front row of the business cabins; 35 “Premium Plus” seats (up from 21) with 38 inch pitch, and 123 seats in economy (down from 158) including 33 "extra legroom Economy Plus seats (34 inches compared with 31 inch pitch).
American, with a relatively smaller intercontinental widebody network has been a bit late to the game. It is meanwhile retrofitting its new Flagship Business suites (with sliding privacy doors) to its 777 fleet. Along with an expanded premium economy cabin it see a 25% increase in premium seat offering. It is also installing the product on its new A321XLRs.
Loyalty pays
Hand in hand with this has been an increased focus on using the loyalty programs as a way of generating income. Rewards (miles) used to be provided depending on how far a passenger travelled. Increasingly they are are earned on the basis of how much the passenger spends, and how she spends. The loyalty model used to be that miles redeemed would be paid for by the airline by using the near zero marginal cost of an unsold seat. Now the funds are increasing provided by payments from banks in co-branded credit card deals with the airlines.
In 2025, Delta received $8.2bn in cash from American Express, 11% up on the prior year and accounting for 14% of adjusted revenues. United also recognised a healthy increase of 9% in royalty revenues. American is in the process of implementing a new deal with Citi. That cash is funded from the annual credit card fees as well as a proportion of the interchange fees the card companies charge merchants (and therefore the customer).
There is a Bill being considered in Washington to limit credit card interest rates. That, if enacted, may not noticeably affect the airline passengers who hold co-branded cards: those who can afford the high annual fees that give them lounge access are likely to be the “haves” and be able to pay off the balance each month; but it might reduce the availability of credit to the “have-nots”. Of more concern for the industry is another Bill (under discussion for the past two years) that would put a limit on credit card interchange fees. If that were to be enacted, it could undermine the loyalty programmes’ business models.
K-shaped economy
The development of the US industry in 2025 leads into a popular theme that the economy is K-shaped — upper-income earners and asset-owners thrive (upward stroke), while low- and middle-income households fall behind because of inflation and rising living costs (downward stroke). The major network carriers did well in 2025. The LCCs had a dire year (and Spirit collapsed again into bankruptcy). Those at the upper quartiles of income and wealth, boosted by buoyant stock market returns, are spending happily (premium leisure, more legroom, extra comfort), and those at the bottom of the wealth pyramid — the budget-conscious travellers — are finding it difficult to make ends meet and can’t even afford a cheap ticket on a low cost carrier.
All three of the major network carriers expressed optimism for strong financial returns in 2026. That optimism may have been dented a little after Trump decided to go to war: jet fuel prices have doubled. The US carriers in general do not hedge their fuel costs (although Delta with its in-house fuel refinery can be said to hedge the crack-spread) and will bear the full force of the increase in costs.
But all three are reporting that the strength of demand appears more than sufficient to absorb the necessarily higher fares required to pay for fuel: both Delta and American upped their Q1 revenue forecasts. United — expecting a $4.6bn jump in fuel costs this year — said it was cutting some capacity on weak-performing flights but that recent fares booked were 15%-20% up on the year before. Reuters quoted Scott Kirby’s continuing optimism. “At least as the environment sits today,” he said, carriers could recover “100% of that increase in fuel price.”
Yet, while demand may be strong, there is the added problem of a continuing partial government shutdown severely affecting airline passengers: TSA security agents are once again are working unpaid (or calling in sick) while Washington argues over the budget for the Department of Homeland Security.
