How Do Airlines Make Money?

Where does an airline's money come from?

Most airline revenue comes from selling seats: in 2025, the 25 scheduled U.S. passenger airlines that report to the Bureau of Transportation Statistics (BTS) had total operating revenue of $252.6 billion, and fares made up $187.2 billion of it, or 74.1%.^[1] That share was slightly lower than the 75.0% recorded in 2024.^[1]

Worldwide, the International Air Transport Association (IATA) expects industry revenue of $1.165 trillion in 2026, up 9.4% from $1.065 trillion in 2025.^[3] Its June 2026 outlook forecasts passenger tickets at $839 billion, ancillary and other revenues at $165 billion, and cargo at $162 billion.^[3]

• Passenger tickets839
• Ancillary and other165
• Cargo162

Source: International Air Transport Association (IATA) [3]

IATA says ancillary revenue is growing quickly and, in 2026, is set to bring in more than air cargo for the first time since 2019.^[3]

How much do bag fees and change fees bring in?

Besides the fare, airlines charge for extras: Delta Air Lines, for example, reports "travel-related services," made up mainly of baggage fees, administrative fees and on-board sales, which brought in $2,043 million in 2025, according to its annual report.^[4] American Airlines lists fees for choosing seats among its "ancillary products."^[5]

BTS reports two kinds of fees separately: U.S. passenger airlines collected $7.4 billion in baggage fees in 2025, 2.9% of operating revenue, and $1.1 billion in reservation change fees, 0.4%.^[1] Bag fees mattered more on domestic flights, where they were 3.2% of revenue ($6.0 billion), than on international flights, where they were 2.2% ($1.4 billion).^[1] In the second quarter of 2026, U.S. airlines collected $2.1 billion in baggage fees, 2.8% of operating revenue.^[2]

Why do frequent-flyer programs and credit cards matter?

Airlines such as Delta and American also sell frequent-flyer miles to other companies, such as credit card, retail, car rental and hotel companies, whose customers earn the miles by spending with them.^[4][5] Delta's most valuable contract to sell miles is its co-branded credit card deal with American Express: cardholders earn miles on purchases, and some get perks such as baggage fee waivers, lounge access and priority boarding.^[4] According to Delta's 2025 annual report, payments from American Express totaled $8.2 billion that year, up about 11% from 2024, and Delta expects them to grow to $10 billion over the next few years.^[4]

The miles turn into revenue in more than one way: Delta recorded $4,237 million of "loyalty travel awards" in passenger revenue in 2025, when members redeemed miles for about 35 million award tickets.^[4] A further $3,362 million of "loyalty program" revenue came from third parties' use of Delta's brand, other benefits built into the miles it sells, and miles redeemed for things other than flights.^[4]

American Airlines calls its AAdvantage program, and its co-branded credit cards in particular, material assets of its business.^[5] It received $6.2 billion in cash payments from co-branded credit card and other partners in 2025, compared with $6.1 billion in 2024, a figure that included a one-time payment tied to a new card agreement.^[5]

How much does cargo add?

Passenger airlines also carry freight: Delta earns cargo revenue from the cargo space on its regularly scheduled passenger aircraft.^[4] Its cargo revenue was $900 million in 2025, about 1.4% of its $63,364 million total (a calculation from those two figures).^[4] American reported $839 million of cargo revenue in 2025.^[5] Globally, IATA forecasts $162 billion of cargo revenue in 2026, up 7.2% from $151 billion in 2025, driven mainly by airlines recouping higher fuel costs: IATA expects cargo traffic to grow by just 0.7%.^[3]

What are an airline's biggest costs?

BTS highlights two costs: labor and fuel.^[1] On U.S. airlines' domestic operations in 2025, labor cost $67.7 billion, or 37.5% of operating expenses, and fuel cost $27.4 billion, or 15.2%.^[1] On international operations, labor was 38.7% of expenses and fuel 21.5%.^[1]

Fuel costs can jump quickly: in the second quarter of 2026, fuel took 21.7% of domestic operating expenses, up from 15.0% a year earlier, and 31.1% of international expenses, up from 20.9%.^[2] Worldwide, IATA expects airlines' fuel bill to rise by nearly 40%, from $252 billion in 2025 to $350 billion in 2026, with jet fuel averaging $152 a barrel, up almost 70% on 2025.^[3] That would raise fuel to 31.4% of operating expenses, from 25.4%.^[3] Labor is the largest of the other costs, at a forecast $271 billion, so fuel and labor are the two biggest costs in IATA's outlook.^[3]

At Delta, salaries and related costs were $17,520 million in 2025 and aircraft fuel and related taxes $9,819 million, out of total operating expenses of $57,542 million.^[4] Delta says fuel was about 17% of its total operating expense that year.^[4]

Why are airline profit margins so thin?

After these costs, little is left: U.S. scheduled passenger airlines made an after-tax net profit of $6.0 billion in 2025, a net margin of 2.4%, with an operating margin of 4.5%.^[1] In the second quarter of 2026, their net profit was just $16 million, a net margin of 0.0%, compared with $4.0 billion a year earlier.^[2]

Results differ a lot between airlines: Delta reported net income of $5,005 million on operating revenue of $63,364 million in 2025, while American Airlines Group reported net income of $111 million on $54,633 million.^[4][5]

In its June 2026 outlook, IATA expects airlines worldwide to earn a combined net profit of $23.0 billion in 2026, a 2.0% net margin, down from an estimated $45 billion and 4.2% in 2025, because of war-related disruption in the Middle East and high fuel prices.^[3] That is about $4.50 of net profit per passenger.^[3] IATA says that even in the best of times the industry has low margins and returns below its cost of capital: it forecasts a 4.3% return on invested capital in 2026, against an estimated 8.5% cost of capital.^[3]