For Western New Yorkers planning upcoming travel, especially summer getaways, rising airline ticket prices are becoming a significant concern. Carriers are increasingly feeling the pinch of escalating jet fuel costs, a direct consequence of the war in the Middle East and its disruptive impact on global oil supplies.
Industry experts suggest it’s no longer a matter of if airfares will rise, but rather when, for how long, and by how much. The most substantial impact is likely to be felt on long-haul international routes, which inherently consume more fuel than shorter flights.
While several airlines outside the U.S. have already implemented fare increases or fuel surcharges to mitigate these growing expenses, domestic carriers are also preparing for adjustments. United Airlines CEO Scott Kirby recently cautioned that airfare hikes in the U.S. will “probably start quick” as increasing fuel costs ripple through the airline industry.
Why are jet fuel prices rising?
The ongoing conflict in the Middle East is significantly constraining oil exports. Major producers such as Kuwait, Saudi Arabia, and Iraq are scaling back output as shipments encounter increasing obstacles.
Actions, including Iran’s attacks on commercial ships across the Persian Gulf and targeting of oil infrastructure in Gulf Arab nations following U.S. and Israeli strikes, have effectively disrupted traffic through the Strait of Hormuz. This narrow passage is critical, carrying approximately one-fifth of the world’s oil supply.
Volatile crude oil prices, which have already caused retail gasoline costs to surge, are having a similar impact on jet fuel. The Argus U.S. Jet Fuel Index reported the average price in the U.S. reaching $3.99 per gallon on Friday, a sharp increase from $2.50 just two weeks prior to the conflict’s onset. This index meticulously tracks the average price airlines pay for jet fuel at major U.S. airports.
According to the U.S. Department of Transportation’s Bureau of Transportation Statistics, U.S. airlines paid an average of $2.36 per gallon for fuel in January, the most recent data available, indicating the rapid escalation since then.
What does it mean for airlines?
Some airlines are partially protected from sudden price spikes through fuel hedging, a strategy that allows them to lock in fuel prices months or even years in advance. However, not all airlines hedge, and those that do are usually only protected for a portion of their fuel needs. This means prolonged price surges may compel more carriers to raise fares.
“No one hedges anymore, and even if you do, hedging the crack spread is really hard to do,” Kirby said at a Harvard event last week. The crack spread is defined as the difference between the price of crude oil and the price of products produced from it, such as gasoline.
Another factor impacting airlines: Air space closures have necessitated rerouting flights around parts of the Middle East. This can lead to longer routes, additional fuel consumption, and consequently, higher operating costs.
What does it mean for travelers?
Travelers may feel the impact in several ways.
Airlines can add or increase fuel surcharges, an extra fee common among carriers outside of the U.S. that is appended on top of the base ticket price.
Major U.S. carriers, however, typically do not charge a separate fuel surcharge. Instead, they integrate fuel costs into the overall ticket price. This means any increase is more likely to manifest as a higher base fare for travelers, according to Tyler Hosford, security director at global risk management firm International SOS.
Airlines may also adjust what they charge for premium add-ons, such as seat upgrades, extra legroom seats, checked bags, or priority boarding, as another strategy to offset higher operating costs. For consumers, this implies that even if the base fare doesn’t rise immediately, the total cost of a trip could still increase once additional fees and upgrades are factored in.
If higher fuel prices persist, airlines may also adjust schedules or reduce certain routes, noted Christopher Anderson, a professor at Cornell University’s business school whose research includes operations and information management in the hospitality and airline industries.
How high could airfares climb?
It is difficult to predict exactly how much ticket prices could increase as a result of costlier oil and fuel. Industry analysts indicate that the impact of higher jet fuel costs can vary based on the route, airline, and travel demand.
Fuel typically accounts for 20% to 25% of an airline’s operating costs, making it the second-largest expense after labor, according to Rob Britton, an adjunct marketing professor at Georgetown University and retired American Airlines executive. A sharp rise in fuel prices can therefore have a major impact on airlines’ budgets.
Which airlines have announced price hikes?
So far, most fare increases and fuel surcharges are originating from airlines based in the Asia-Pacific region, but experts anticipate more airlines — especially those without extensive fuel hedging strategies — to follow if high jet fuel prices continue.
Hong Kong’s flag carrier, Cathay Pacific, stated it would increase its fuel surcharge starting Wednesday.
“The price of jet fuel has approximately doubled since March amid the latest developments in the Middle East,” the airline said in a statement Thursday.
Other airlines with price increases or new surcharges include:
- Air France-KLM said roundtrip economy fares on long-haul flights could rise by about 50 euros (approximately $57).
- Air India introduced fuel surcharges Thursday on certain routes. After March 18, the carrier states the surcharge will increase by up to $50 for all tickets to Europe, North America, and Australia.
- Hong Kong Airlines increased fuel surcharges across several routes as of Thursday.
- FlySafair in South Africa announced a temporary fuel surcharge.
Experts advise that travelers planning summer trips may be able to limit the impact of rising airfares by booking earlier rather than waiting for last-minute deals.
Locking in ticket prices sooner — especially with flexible booking options that allow changes — can help secure lower prices before airlines adjust rates further.
Hosford, the security director at International SOS, suggests travelers remain flexible with travel dates, check fares at nearby airports, and set alerts for price drops. He also recommends utilizing frequent flyer miles or credit card points to book flights instead of holding out for a “perfect deal.”
“If you were going to spend cash on the flight but now you’re not, then that’s a good redemption deal,” he said.
