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Last Friday, Iran declared the Strait of Hormuz open to commercial shipping, triggering a sharp decline in oil prices and a surge in airline stocks. The relief proved short-lived.
By Saturday, Iran’s military had retaken strict control of the strait after its Revolutionary Guard Corps attacked two commercial vessels. The following day, the U.S. seized an Iranian-flagged cargo ship. Oil prices then jumped 5% overnight into Monday as a ceasefire—set to expire on Wednesday—appeared to hang by a thread.
The U.S. airline industry has repeatedly reshaped itself after external shocks. Historically, when events such as recessions, wars, or energy spikes hit, weaker carriers have either folded or been acquired, while stronger airlines have emerged leaner and more profitable.
After deregulation in 1978, fare wars and overcapacity pressured margins and contributed to a wave of mergers through the 1980s. The September 11 attacks led to TWA’s collapse and forced US Airways into a merger with America West. The 2008 financial crisis produced deals such as Delta-Northwest, United-Continental, and Southwest-AirTran. By 2013, following American’s merger with US Airways, the modern “Big Three” structure was firmly established.
Today, the five largest carriers—Delta, American, United, Southwest, and Alaska—have absorbed more than 40 smaller airlines since 1960.
Analysts linking the latest disruption to higher jet fuel costs point to renewed pressure on weaker balance sheets. Spirit Airlines, already in Chapter 11 for the second time in under a year, is reportedly nearing liquidation. Its prior merger attempts—with JetBlue and then with Frontier—both failed, and the airline’s low-cost model has struggled to absorb fuel price increases.
At the same time, United Airlines CEO Scott Kirby reportedly pitched the White House on a potential merger with American Airlines during a February 25 meeting with President Trump. American publicly rejected the idea late Friday, stating it is “not engaged with or interested in any discussions regarding a merger with United Airlines.” The report also notes that the White House has declined to take a position.
Analysts have identified nearly 300 overlapping routes that would likely require divestitures, and any deal would face significant antitrust scrutiny. For now, the proposed combination appears “on ice.”
While fuel costs remain a central risk, the article argues that airline business models have evolved. Carriers have increasingly built diversified revenue streams through premium products, loyalty programs, and co-branded financial services.
Delta’s most recent earnings report is cited as an example. The company posted record first-quarter revenue of $14.2 billion, up more than 9% year-over-year, even as fuel costs rose sharply. Delta projected fuel costs of $4.30 per gallon for the quarter, up from $2.62 in the prior year’s quarter—an increase expected to add more than $2 billion in costs. Despite that, earnings grew more than 40% year-over-year.
Delta attributed performance to higher premium revenue (+14%), loyalty revenue (+13%), and a co-branded American Express deal that has exceeded $2 billion. The article also notes that diversified, high-margin revenue streams represent 62% of Delta’s total revenue and are growing in the mid-teens. It adds that CEO Ed Bastian said Delta is reducing capacity growth and working to recapture higher fuel costs through pricing.
The article also reviews historical analysis of the relationship between Brent crude and the NYSE Arca Global Airlines Index going back to 2001. It concludes that oil prices alone do not reliably indicate where airline stocks will go; instead, the trend in oil appears more important.
According to the analysis, when oil has been rising over the prior four weeks, airline stocks returned an average of nearly 6% over the following year. When oil had been falling over the same four-week period, airline stocks returned an average of almost 14%. The article states that the direction of oil mattered about twice as much as its price.
It highlights a particularly strong setup: when oil was elevated (top 20% of its historical range) but began declining over the prior 13 weeks, airline stocks returned an average of nearly 31% over the next 12 months, with positive outcomes roughly 84% of the time.
As an illustration, the article points to Friday’s Hormuz reopening announcement, when crude dropped 11% and airline stocks rose. It then contrasts that with Monday’s rebound in oil after Iran reversed course and the U.S. seized a vessel, with crude up 5%.
Beyond fuel and geopolitics, the article emphasizes demand. The World Travel & Tourism Council reported that the global sector reached a record $11.6 trillion GDP contribution in 2025, growing nearly 50% faster than the overall global economy.
In the U.S., the U.S. Travel Association estimates that larger tax refunds this year could add $5.1 billion to domestic leisure travel spending, with middle-income households driving most of it.
The article notes that airfares were up about 15% year-over-year in March, but it cites Southwest CEO Bob Jordan saying fares have not outpaced broader inflation since the pandemic. It also references Bureau of Labor Statistics data in support of that point.
Overall, the article frames the key risk as costs—especially fuel—while arguing that airlines with premium and diversified revenue models are better positioned to withstand turbulence. It concludes that when the fuel headwind eases, those carriers should be in the strongest position.
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