U.S. airlines are entering 2026 with widening gaps between premium-focused carriers and price-sensitive operators, as airlines lean further into higher-paying customers while cost pressures, infrastructure limits, and uneven demand continue to reshape the industry.
Airline executives entered 2025 with optimism. Delta Air Lines CEO Ed Bastian forecast a record year for the carrier. That outlook softened as concerns over President Donald Trump’s trade war, cautious consumers, and an oversupply of domestic seats pushed U.S. airfare lower and weighed on profits.
Profits Concentrated At The Top Of The Market
Through the first nine months of the year, Delta Air Lines and United Airlines accounted for nearly all U.S. airline profits. Industry analysts said the imbalance reflects long-running trends that accelerated as costs rose and wealthier travelers increased their share of total spending.
Robert Mann, president of aviation consulting firm R.W. Mann & Co., described the situation as a “K-shaped” market. He said airlines are focusing on higher-paying customers while limiting losses at the lower end of the fare spectrum.
Any economic weakness in 2026 could hit airlines exposed to coach-heavy domestic travel harder, particularly lower-cost carriers that rely on price-sensitive customers.
Reliability And Infrastructure Remain Constraints
Despite the shift toward premium offerings, airlines continue to face operational challenges. Mann said reliability remains a critical issue, noting that U.S. carriers posted a 77% on-time rate, defined by the Department of Transportation as arriving within 15 minutes of schedule.
He said delays and cancellations affect all passengers regardless of ticket price. Airlines also continue to deal with shortages of air traffic controllers and aging infrastructure, problems that are expected to take years to resolve despite billions in federal funding.
Budget Airlines Adjust Strategy Amid Pressure
Lower-cost carriers are adjusting their models as profit pressures mount. JetBlue Airways has been shifting toward more profitable routes and premium seating. The airline plans to introduce a domestic business class in mid-2026, featuring roomier front-cabin seats that stop short of its lie-flat Mint suites.
Spirit Airlines, once a symbol of ultra-low-cost travel, entered its second bankruptcy in less than a year. The filing followed a blocked acquisition by JetBlue, aircraft groundings, rising costs, and other challenges that have raised doubts about the airline’s future as a standalone company.
A Raymond James note dated Dec. 19 said analysts do not expect Spirit to remain independent by next year, citing a possible merger or Chapter 7 outcome. Analysts view Frontier Airlines as the most likely merger partner, though no deal has been confirmed. Spirit said earlier this month it is in active negotiations for either a standalone restructuring or a transaction. Frontier and Spirit declined further comment.
Southwest Prepares For Structural Changes
Southwest Airlines is set to end its long-standing open-seating model on Jan. 27, when assigned seating begins. The move follows other changes rolled out last year, including the introduction of extra-legroom seats priced at a premium and the start of bag fees for many customers.
Those baggage fees generated more than $7 billion for U.S. airlines in 2024, the most recent full year of data from the Transportation Department.
Southwest’s stock rose nearly 23% in 2025, outperforming the NYSE Arca Airline Index’s 5% gain and exceeding returns from Delta and United. Investors have supported the airline’s transition toward a more segmented pricing model, a shift accelerated by activist investor Elliott Investment Management taking a stake.
American Airlines Pushes Upmarket While Tightening Loyalty Rules
American Airlines is expanding its lounge network and plans to introduce Airbus 321XLR aircraft in 2026 as it seeks a stronger position in premium travel. The airline also said free inflight Wi-Fi for loyalty members will begin in January.
Brand-related changes already implemented include offering Lavazza coffee across cabins and Champagne Bollinger in top-tier lounges and premium seats. Despite these efforts, American still trails Delta and United in profitability.
Just before Christmas, American announced it will stop awarding frequent flyer miles on basic economy tickets, following a similar move by Delta in prior years. The airline has not yet announced elite status requirements for 2027, even as Delta and United said they will keep thresholds unchanged.
Operational Tweaks Aim To Improve Performance
American is also adjusting its operations to improve reliability. The airline said it will increase flight banks at Dallas Fort Worth International Airport from nine to 13. It is also testing electronic self-scanning boarding gates for domestic narrow-body flights and plans to remove bag sizers from gates starting in September to speed boarding.
Industry forecasts remain cautious. American Express Global Business Travel said in a mid-November outlook that airfares are likely to remain flat in 2026 compared with 2025. Demand has recovered following a prolonged government shutdown, but airline executives said visibility into next year remains limited.
Southwest CEO Bob Jordan told CNBC in December that the first quarter appears strong, though he said it remains uncertain whether results will exceed the prior year.
Featured image credits: Stanislav Doronenko via Wikimedia Commons
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