Why Airlines Can't Afford to Keep Saying Yes: The Cracks Behind The Numbers

The largest US airlines recently unveiled their 2025 financial results, delivering headlines that suggest another chapter in American economic resilience. United Airlines recorded revenue of $59.1 billion last year, while American Airlines brought in $54.6 billion, both company records. Delta Air Lines projects 20% earnings growth through 2026, driven predominantly by premium cabin demand as corporate and high-income travellers sustain spending.

The aviation industry has embraced these strong results since they understand the financial turbulence of commercial airlines. However, naturally there are always critics who look at positive financial statistics and believe it will only benefit greedy shareholders and elite airline executives at the expense of the airline’s workforce. While flight attendants, baggage handlers, and pilots are the reason that planes take off and land each day, they rarely see the dividends from a successful financial year.  Yet this framing, however politically satisfying, misreads the deeper financial reality confronting US carriers.

The industry's recent financial performance reflects genuine operational achievements, yet challenges remain on the horizon. While revenue records and strategic partnerships particularly with credit card companies demonstrate airlines' ability to diversify income streams, rising labour costs and slim operating margins mean carriers must remain vigilant. External pressures, from geopolitical uncertainties to economic headwinds, will test the sector's resilience in 2026.

Operating on Tight Margins

The airline industry's defining characteristic remains its razor-thin profitability. Net margins for US Airlines are forecast at 3.4% for 2026, unchanged from 2025 and representing roughly half the average across all industries. The industry has never exceeded 5% net margin. The oft-cited comparison bears repeating; airlines earn $7.90 profit per passenger, less than Apple generates from a single iPhone cover. Even more concerning, airlines are losing money on their investments. They earn returns of 6.8% but need to make 8.2% just to cover their costs - meaning the industry isn't profitable enough to justify the money invested in it. While tech companies like Apple make returns of over 50%, airlines struggle to reach even single digits. This leaves them with little room to handle rising costs or pay higher wages without putting their financial survival at risk.

The airline industry has always operated on tight margins even with record profits.

The Labor Cost Challenge

Labor costs have become the industry's biggest expense, now accounting for 28% of total costs and surpassing fuel for the first time. Between 2023 and 2025, US carriers saw labor costs increase by 28% following union negotiations that addressed concessions made during the pandemic. American Airlines paid $643 million in one-time charges from contract agreements in 2024.

Admittedly some profit-sharing arrangements reflect a sophisticated approach to workforce engagement. Delta paid out $1.3 billion in profit-sharing for 2025, equivalent to 8.9% of eligible earnings, a substantial investment that underscores the airline's recognition that strong financial performance must translate into tangible rewards for employees. While these programs help build workforce loyalty and make carriers more competitive in attracting talent, they represent a strategic choice: prioritizing employee satisfaction and retention as core competitive advantages. Delta's commitment to sharing success directly with workers distinguishes its labor relations model from other airlines since it often gives more in profit-sharing bonuses than the total annual profits of some competitors.

Nevertheless, carriers don't have the financial cushion they enjoyed during the strong years of 2016-2019. While current profit figures may look healthy, earnings per passenger remain below 2023 levels, even as fixed costs have risen. Airlines have found it challenging to restore workforce productivity to 2019 levels despite expanding headcount, creating an efficiency gap that wage increases make harder to close.

Delta paid $1.3 billion in profit-sharing for 2025, proving strong performance can translate into real rewards for workers, even in a tight-margin industry.

Fuel Prices and Geopolitical Uncertainty

Political instability adds pressure at an inconvenient time. Ongoing conflicts and trade tensions could affect fuel prices, which have historically been a major profitability challenge for aviation. While current oil market conditions are relatively favorable, with demand growth slowing compared to supply, there's little room for error. A sustained $10-per-barrel increase would significantly reduce forecast earnings across the sector.

Regulatory requirements continue to grow. Sustainable aviation fuel mandates will add $4.5 billion in costs industry-wide in 2026, while infrastructure charges and airport fees remain elevated. Supply chain issues persist, driving maintenance costs higher as fleets age and parts availability stays limited. Boeing delivery delays are forcing carriers to keep aircraft in service longer than planned, increasing both operational challenges and expenses.

Fuel costs may be stable now, but geopolitical uncertainty looms.

Looking Ahead

Strong revenue figures shouldn't overshadow aviation's cyclical nature and the growing divide within the industry. While major carriers show signs of strength, the broader picture is more concerning. Low-cost carriers face the same cost pressures without the pricing flexibility or additional revenue sources of legacy airlines. Spirit Airlines entered bankruptcy in November 2024, while Frontier and others operate on margins even thinner than their larger competitors.

Airlines enter 2026 carrying more debt than before COVID and facing substantial capital requirements as fleet renewal programs continue. Labor groups understandably seek compensation that reflects inflation and their contributions. However, sustainable wage structures need to account for the industry's underlying economics: margins that barely cover capital costs, business models that depend heavily on fees and extras, and vulnerability to external shocks that can eliminate profits quickly. Financial prudence isn't about limiting worker compensation; it's about ensuring the industry can maintain employment when difficult times return.