Amid Spirit Airlines’ bankruptcy, airlines that were once confident in their financial resilience are now navigating a volatile geopolitical landscape.
The collapse of Spirit Airlines, the scrappy low-cost carrier, underscores the fragile economics of air travel amid $4-per-gallon jet fuel and high crude prices.
From Atlanta-based Delta Air Lines to Hong Kong-based Cathay Pacific, carriers are reassessing routes and fares as soaring fuel costs threaten profits, while the Iran war disrupts shipping through the Strait of Hormuz.
Airlines and investors had anticipated stable fuel costs in the second quarter, but analysts have had to adjust their outlooks. Forward-looking projections indicate fuel prices will remain above previous forecasts, a development that could continue to pressure airline profit margins and ticket pricing strategies.
“Fuel forward expectations for the second quarter haven’t changed, but what has changed are expectations for the rest of the year,” Matt Woodruff, head of aerospace and defense/transports at CreditSights, told Global Finance. “[Fuel prices] will be higher for longer than we were thinking a month or two ago.”
‘Good Aircraft’ Grounded
On April 23, former President Donald Trump publicly mused about rescuing Spirit Airlines, calling the carrier “virtually debt-free” and noting its “good aircraft, good assets.” He suggested buying the airline and potentially profiting when oil prices decline, adding, “I’d love to be able to save those jobs … I like having a lot of airlines, so it’s competitive.”
The plan never materialized, and Spirit shut down on May 3. Travelers remained stranded as jet fuel prices hit unprecedented highs amid the Iran war, now more than two months old.
“We regret to inform you that all Spirit Airlines flights have been canceled, effective immediately,” read a notice when opening the carrier’s app.
The ripple effects were felt beyond Dania Beach, Florida, where the airline is based. Spirit operated international flights throughout Latin America, the Caribbean, and Central America, including Colombia, Mexico, the Dominican Republic, Jamaica, Peru, Costa Rica, and Aruba. Its sudden closure left 17,000 direct and indirect employees without work.
The Trump administration and Treasury Secretary Scott Bessent quickly blamed Biden-era opposition to the much-debated Spirit/JetBlue Airways Corp. merger. The two carriers had a $3.8 billion deal in the works, which Bessent argued “would have given them much more resiliency.” Spirit filed for bankruptcy protection in November 2024, saddled with more than $2.5 billion in losses since 2020.
But no airline, not even one with low-cost appeal, is immune to the whims of the global oil market.
At the time of Spirit’s first bankruptcy under Biden, U.S. airlines were paying an average of $2.31 per gallon for jet fuel. Under Trump, that figure has nearly doubled, with the Argus US Jet Fuel Index reporting $4.26 per gallon as of May 4.
Consider the Warnings
Brent crude prices are hovering above $100 per barrel, while regional conflicts near the Strait of Hormuz—through which a significant share of the world’s oil passes—continue to heighten supply concerns.
Fuel is often the largest single operating expense for airlines. Delta Air Lines, for example, disclosed in a March filing that its 2025 fuel costs accounted for 31.3% of its operating expenses. The company noted that a one-cent increase in jet fuel adds about $40 million to its fuel tab for the year.
Delta paid $2.7 billion for fuel in the first quarter of 2026.
The airline produces some of its own jet fuel, which means it avoids paying full market prices for fuel conversion, shielding it from the worst of the “crack spread” costs, Woodruff said. “They’re getting a benefit relative to everyone else, but they’re still feeling it.”
Cuts are underway. Starting May 19, the company will no longer offer food or drinks on flights under 349 miles.
Other carriers are responding to the latest volatility by raising fares, canceling routes, rerouting aircraft to avoid restricted airspace, and reconsidering expansion plans. Airfares have increased five times since the war in Iran began, with a sixth hike underway late last month, according to the Wall Street Journal.
“The routes that aren’t doing well, those are going first,” Woodruff said. “Regional jets, for example, often don’t make much money — those are, for sure, a target.”
What’s Next
Spirit isn’t the only airline feeling the effects of this new norm. Its former suitor, JetBlue, is reevaluating routes that may no longer cover rising fuel, airport, and maintenance costs. Delta is canceling hundreds of flights, while international carriers — including Paris-based Air France, Cologne-based Lufthansa, and Cathay Pacific — are trimming routes to protect margins.
This shift stands in stark contrast to late 2024, when Delta CEO Ed Bastian welcomed the incoming Trump administration as a “breath of fresh air.” Through much of 2025, that optimism seemed justified, as major U.S. carriers forecast continued profitability into 2026.
And that might still be the case despite the war in Iran rattling global energy markets and upending long-held assumptions about fuel stability and travel demand.
Each airline is now telling a two-sided story about how robust demand is while also raising fares. United Airlines’ fare numbers, for example, will be 15% to 20% higher than last year.
Whether consumers will tolerate such a price hike remains to be seen. “Ultimately, consumers are going to decide what they are willing to pay and what they aren’t, not a formula,” Southwest CEO Bob Jordan told reporters in April.
Chevron CEO Mike Wirth echoed the concern, telling CBS’s Face the Nation on April 23 that instability in the Strait of Hormuz was likely to continue driving up energy costs.
Even the forward fuel curves today indicate that, even if the war ended today, costs wouldn’t normalize until well into next year, Woodruff said.
By 2027, airlines expect to offset most, if not all, of the recent fuel cost increases through higher fares, he added. But that outlook assumes forward fuel prices in the first quarter of 2027 will be lower than they are today. If they’re not, carriers could continue to face significant financial pressure.
