High Jet Fuel Prices Can Melt Your Summer Travel Plans

The price of Jet fuel prices have doubled since the start of the Iran war two weeks ago, as disruptions to key shipping lanes reduce global trade in crude and refined oil. The airlines that fly it are scrambling to keep up. Jet fuel alone makes up between 25 and 35 percent of an airline’s operating costs. The next stop is high ticket prices.

It is already happening, to some extent. Several airlines, including Air Asia and Hong Kong Airlines, openly state that they are adding to their regular fuel surcharges. US domestic ticket prices have risen (although they were rising before the war as well). “When [the oil price] it’s going up fast, airfares are going up,” United Airlines CEO Scott Kirby told the Wall Street Journal this week.

Because no one has a crystal ball, what this means for travelers is up in the air. Travel and airline industry experts say it will take a few more weeks of conflict with higher fuel prices to really begin to reset the travel economy—or even know, if it’s happening. Airlines set original schedules, routes, and ticket prices months in advance, meaning that the money they lose today due to higher costs may be recouped in future airline ticket sales.

Here’s what may happen behind the scenes for airlines that will determine whether higher fuel prices translate into less efficient travel plans.

Visiting vs. Recreation

For now, airlines may be playing on the edge of ticketing systems, said Ahmed Abdelghany, who studies aviation as a professor at Embry-Riddle Aeronautical University’s College of Business. Some of these changes will probably not be noticeable to the average flyer. To make airplanes more fuel-efficient, for example, and less expensive to operate, airlines probably already monitor how much fuel is in each plane, he says—the less weight, the more fuel burned. Raising ticket prices is a simple promotion for airlines, but not an automatic move.

“We say that aviation has three demons: fuel price volatility, demand volatility, and climate change,” Abdelghany said. “For airlines to raise fares, it’s not an easy decision, because it will affect demand.”

In fact, many airlines would protect regular travelers from price increases, initially, because they believe that some demand will remain despite the higher fees. Since the disruption that came with the Covid-19 pandemic, several major airlines have changed their business models to focus on business flyers, which often ignore prices as they run on the company’s dime. “There’s a lot of focus on high-end travelers and price increases, as opposed to a model that was very domestically focused and had a large share of business from large cabin,” said Jarrett Bilous, managing director of transportation, aerospace, and defense at S&P Global Ratings. Airlines may choose to pass on higher fares to passengers who spend less money first.

Tickets that are less affected by short-term price increases, therefore, may be more likely to have leisure travelers: trips that start and end on weekends, or fortnightly rather than a few days (read as “business trips”).

But there is no guarantee that airlines will stick to that strategy if fuel prices rise, Bilous said. New ideas about sustainable demand for business travelers were not tested during the real financial squeeze. “We really haven’t had a sustained drop in demand or price shock for a long time,” he said.

The New World

If the jet fuel price shock continues for weeks or even months, big changes—and disruptions—could be directed at an airline near you. Airlines may reduce their schedules, targeting less profitable routes to begin with. (They can also offer flights through the undeveloped area surrounding the ever-growing conflict.)

During the massive and ongoing fuel shortage in 2008, airlines were charged to check and hold bags. Although the airline business has changed since then, it is likely that airlines will once again start trying new ways to make more money from flyers. “New complementary revenues, fees, charges, perhaps reducing the maximum weight of entry fees—it’s possible,” Abdelghany said. But these kinds of new programs will take time to implement.

Bilous, the analyst, stopped short of giving advice on buying tickets. “The risk of higher prices has definitely increased compared to a few weeks ago,” he said. “How high they go, if they go, remains to be seen.”