Catenaa, Thursday, June 25, 2026- The US airline industry has finally recovered from pandemic-era losses after six years, as lower oil prices eased the pressure on profitability.
The US Global Jets ETF, a major proxy for the biggest airline stocks, closed up 4.2% Wednesday, at its highest level since December 2018, and continued to rise on Thursday.
This year, JETS is outpacing the S&P 500’s 7.9% gain with a 20% jump. Yet, the index has barely gone anywhere since the end of 2019, eking out a mere 3% gain as of Wednesday’s close, while the S&P 500 Index has soared almost 128% over the same period.
The long road to recovery for the sector was dotted with hurdles, including country-specific travel restrictions during the pandemic, aircraft supply shortages, and a record-breaking US government shutdown.
From a January 2020 peak to pandemic trough about four months later, JETS nosedived about 63%. Even when travel demand slowly started to trickle back, it was years before business travelers, the highest margin clients for airlines, returned in full force.
Much of JETS’ latest strength can be attributed to the price of oil sliding under $75 barrel this week against the backdrop of peace talks. Jet fuel is one of the airline industry’s largest expenses, and the spike during the war in the Middle East had put pressure on carriers to protect profit margins.
Companies have raised air fares to cope with the higher costs, cut routes, increased checked bag fees, and grounded older, less-efficient aircraft.
“Airlines are the most leveraged out of the travel subgroups to oil prices, so with oil coming down, they’re going to have the most potential for margin to move higher,” said Bret Kenwell, an investment analyst at eToro.
Even so, given the cyclical nature of the industry, there is some caution against being too optimistic about its recent strength. Consumer sentiment, though improving slightly, is still hovering around record lows.
During the latest reporting season, both United Airlines Holdings and American Airlines Group lowered their full-year targets due to higher jet fuel prices spurred by the Middle East war.
Delta Air Lines will kick off second-quarter results for the group when it reports on July 10.
Despite the gloominess, there are some bright spots for the industry, such as demand for premium services. Delta and JetBlue Airways said earlier this month that travelers continue to pay up for higher-end products like airport lounges and pricier cabin seats in the face of mounting economic pressures.
United’s Chief Executive Officer Scott Kirby has also noted affluent travelers continue to spend on air travel despite this year’s 20% surge in fares.
Any decline in fuel costs should be a relief to low- and middle-income consumers just in time for the summer travel season. Budget carrier Spirit Aviation’s collapse is also an industry tailwind, as demand has shifted to other airlines, and fewer routes allow for higher fares.
