Whether yields prove ‘sticky’ will likely hinge on the US airline sector’s broad response to potentially easing tensions in the Middle East.
Southwest Airlines is seeking to maintain higher airfares even if fuel prices come down later this year.
In response to the global oil shortage caused by the Iran-USA blockage of the Strait of Hormuz, US carriers have uniformly passed along higher jet fuel costs by raising the price of airline tickets.
Doing so has yet to result in a significant downturn in demand, according to executives with both American Airlines and United Airlines who spoke during an investor conference hosted by financial firm Bernstein on 27 May.
On the following day, Bob Jordan, chief executive of Southwest, echoed that observation at the same conference.
Even with airfares rising substantially since the end of February, Southwest has seen no drop-off in demand for airline seats in its leisure or business segments.
“Across all points in the booking curve, the consumer remains very strong despite this rise in fares,” he says. “So, I become increasingly bullish that we will be able to cover these fuel increases with revenue increases.”
The question moving forward, Jordan says, is to what extent Southwest and competitors can maintain higher fares in the event that the Strait of Hormuz reopens and fuel prices decline. He adds that Southwest will “certainly not attempt to give some of these fare increases back” and suggests that the recent collapse of Spirit Airlines will prove a major factor in industry pricing moving forward.
“You hate to see somebody go out of business, but with Spirit out of business, I think it helps that environment,” he says. “I do think the backdrop is constructive, when fuel drops, to retain the revenue and yield increases we’ve
seen.”
Jordan maintains that, while fares have increased since the beginning of the US-Israeli war in Iran, ticket prices are just now catching up to the broader post-Covid rate of inflation.
By all accounts, higher-paying customers remain the strongest customer segment. American CEO Robert Isom observed on 27 May that “there is a K-shaped aspect to demand right now”, while adding that “it is clear that, no matter what end of the spectrum you’re at, people want to travel”.
In the case of Southwest, the airline is hoping to maintain higher fares while also attracting customers to new product offerings, including extra-legroom seats.
Jordan says those products are already delivering results for the Dallas-based carrier, which reported a $227 million first-quarter profit, compared with a loss of $149 million during the January-March period of 2025 – a welcome outcome after a long stretch of posting middling quarterly results.
“The financial results are moving in the right direction for our shareholders, and I think this is a durable and sustainable change in the airline,” he says.
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