Ongoing tensions between the United States and Iran have led to a sharp increase in oil prices, currently around $85 per barrel, impacting airline profitability as fuel costs rise. The Zacks Transportation – Airline industry has faced difficulties, with the industry ranking at #163 out of 247, indicating poor prospects. Analysts have decreased earnings estimates for the industry by 34.1% year-over-year for 2026.
Despite these challenges, air travel demand remains strong, with American Airlines expecting to transport 75 million passengers on 750,000 flights between May 21 and September 8, a record-breaking figure. Companies like Delta Air Lines, American Airlines, and Copa Holdings are faring relatively well amid this adversity, with Delta recently announcing a 15% increase in its dividend.
Labor costs have also increased significantly, with salaries at American Airlines rising 8.2% year-over-year in the first half of 2026, further straining profitability. The airline sector’s performance has lagged behind the broader market, gaining just 4.8% over the past year compared to the S&P 500’s rise of 23.5%.
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