Travelers expecting a drop in airfares with falling jet fuel prices might be disappointed. Airline executives are hinting they’ll continue to raise ticket prices, even if operational costs begin to ease.
Scott Kirby, the CEO of United Airlines, mentioned during the recent earnings call that as consumers adjust to the current prices, airlines are more likely to maintain these revenue levels. He suggested that if passengers keep paying, it could solidify these higher costs.
Travelers are already noticing the pinch. United Airlines customers are currently spending around 20% more per mile compared to last year.
In a similar vein, American Airlines’ CEO, Robert Isom, expressed confidence in sustaining fare increases, regardless of potential drops in fuel prices. He commented that travel continues to be perceived as worthwhile.
Delta Air Lines’ Ed Bastian also indicated that his airline plans to maintain fare hikes even if oil prices get back to normal after recent fluctuations related to the Iran situation. He noted that Delta aims to keep the price increases that have already been established, including significant checked baggage fees that can now reach up to $200.
The increase in fares aligns with the context of soaring jet fuel prices, which have surged significantly due to the recent escalation in the Iran conflict. Back in late February, before hostilities reignited, fuel prices were around $2.50 per gallon, but they nearly doubled to $5 per gallon by early April.
Government data reflects this trend, showing that while jet fuel averaged about $2.58 in early 2024, it had fallen below $2 last year but shot up to approximately $3.70 by March of this year. Airlines must pass some of these costs on to customers to remain profitable.
Derek Ricefield, co-founder of MarketWatch and former consultant, emphasized that the drastic rise in fuel costs can’t be absorbed entirely by airlines. Moreover, he mentioned that major shifts in how airlines address competition—beyond just fuel prices—could reshape the market.
He noted that the airline industry, being a high fixed cost business, responds significantly to revenue increases, though maintaining pricing power has been a longstanding challenge.
As weaker airlines exit the market, stronger ones gain more pricing control. Spirit Airlines, having filed for bankruptcy twice recently, has contributed to lowering fares historically, but their struggles have allowed larger competitors to increase prices without much pushback.
There’s even talk of the Trump administration considering a plan to purchase Spirit Airlines, suggesting a shift in the competitive landscape.
If pricing competition diminishes, consumers could see fewer options and higher fares. Leisfield warned that travelers might be most affected if airlines reduce flights along with raising prices, noting, “As supply decreases, prices will tend to rise.”
