Q1 Earnings Season Is Starting – What We Expect

Key Takeaways

• Jet fuel prices projected $4.75‑$5.00 per gallon through 2026
• US majors likely break even or incur losses Q1
• Low‑cost carriers face larger traffic drops than legacy airlines
• European hubs may gain Asia traffic as Gulf routes falter
• Gulf carriers' flight movements down 50‑70% year‑over‑year

Pulse Analysis

The current earnings season arrives at a volatile juncture for the airline industry, with jet fuel prices spiking to $4.75‑$5.00 per gallon—a level not seen in recent years. This surge, rooted in supply constraints through the Strait of Hormuz and heightened geopolitical risk, erodes operating margins across the board. Legacy U.S. carriers such as Delta, United and Southwest, which traditionally rely on fuel‑hedging strategies, now confront the prospect of breaking even or posting modest losses for the quarter. Their ability to pass costs onto passengers is limited, especially as demand remains surprisingly steady but price‑sensitive.

European airlines stand to benefit from a re‑routing of traffic that once funneled through Gulf hubs. With Emirates, Qatar Airways and Etihad scaling back flights amid missile threats, passengers and cargo are shifting toward longer, non‑stop services operated by European carriers. This could boost load factors on Europe‑Asia routes, offsetting higher fuel expenses. However, the shift also introduces operational challenges, including longer flight times and the need for more fuel‑efficient aircraft to maintain profitability.

The Gulf carriers face the steepest headwinds. Flight movements at Dubai, Doha and Abu Dhabi have plunged by up to 70%, leaving airlines with high fixed costs and dwindling revenue. Persistent conflict risks further random attacks, which could deter travelers even after hostilities subside. Consequently, analysts anticipate many major airlines will revise annual guidance from positive to break‑even or slightly negative, while investors watch closely for any de‑escalation that could stabilize fuel markets. The outlook underscores how geopolitical shocks can rapidly reshape airline economics, prompting strategic pivots in pricing, network planning, and cost management.