A Delta Air Lines commercial aircraft approaches to land at John Wayne airport in Santa Ana, California U.S. January 18, 2022.
A Delta Air Lines commercial aircraft approaches to land at John Wayne airport in Santa Ana, California U.S. January 18, 2022. Reuters / Mike Blake

U.S. carriers on Tuesday lifted revenue outlook for the quarter through March as falling COVID-19 cases drive up travel demand, but trimmed their capacity plans in response to higher fuel costs.

Atlanta-based Delta Air Lines Inc said last week it saw the highest ticket sales in the company's history due to an "unparalleled" increase in demand.

"We've not seen a stronger demand ... in my career," Chief Executive Ed Bastian said.

Rival United Airlines Holdings said leisure demand is "very strong" and business traffic is rebounding more quickly than expected.

Shares of major U.S. airlines were up between 5% and 10% in midday trade.

Carriers are counting on strong demand to deal with fuel costs, which have surged after Russia's invasion of Ukraine, which Moscow has termed a "special military operation."

Fuel is their second-biggest expense after labor, but major U.S. airlines do not hedge against volatile oil prices like most European airlines. The industry typically looks to offset fuel costs with higher fares.

Tammy Romo, chief financial officer at Southwest Airlines, told an investor conference that the pricing environment has been healthy. The Texas-based carrier has raised its fares.

Similarly, American Airlines said the improvement in revenue is expected to more than offset the increases in fuel and other expenses in the current quarter.

The company, however, cut its capacity for the current quarter, which is now estimated to be down 10% to 12% compared with the same period in 2019.

Delta Air, United Airlines Holdings, Southwest and JetBlue Airways have also tempered their capacity expectations.

Lower capacity at a time when travel demand is robust is expected to further drive up ticket prices and help soften the blow from higher fuel costs.

Bastian said he was not at "a point of nervousness" about rising oil prices. Delta expects its fares would offset fuel costs in the second quarter.

While Russia's invasion of Ukraine has forced the closure of vast swaths of airspace, Bastian said Delta has not seen any impact on bookings for flights to Europe.

Delta expects first-quarter adjusted revenue to recover to about 78% of the pre-pandemic level, compared with 72% to 76% estimated earlier.

United Airlines Holdings Inc said it expects quarterly revenue to be near the higher end of its forecast. Southwest and JetBlue also expect an improvement in their revenue.