Airlines Likely to Keep Ticket Price Hikes Despite Falling Fuel Costs

When jet fuel prices shot up this spring, airlines responded by raising their ticket prices and fees.

But don't expect the airlines to give those price increases back right away.

"If people will pay it, why would you take it back?" said Michael Boyd, a longtime aviation industry consultant. "I mean, if people are willing to pay an extra $5 to check a bag and there's no pushback, don't be silly."

The price of jet fuel is down to its lowest level since the war in Iran began more than three months ago. On Tuesday, the average price of a gallon was $2.80, according to the tracking firm Argus. That's down more than $2 per gallon from the peak in April, though still higher than before the war began.

Travelers have shown they're willing to pay higher airfares, at least so far. And aviation experts say airlines face rising costs across the board, not just for jet fuel.

"We have labor costs coming up. We have operational costs going up at airports," Boyd said in an interview. "So in terms of looking forward to a future of bright low $59 fares, that was on another planet long, long ago."

The high cost of fuel has already hurt airlines' bottom lines, according to Willie Walsh, the head of the International Air Transport Association, which represents airlines around the world.

"We expect average jet fuel prices to be 70% higher year on year. And that will add $100 billion to our collective fuel bill this year," Walsh said at the organization's summit meeting in Brazil earlier this month, resulting in "wafer-thin" profit margins for the global industry of just 2%.

In the U.S. alone, airlines lost a billion dollars in the first quarter of the year, according to the Department of Transportation.

Even if the Strait of Hormuz reopens to shipping, airline executives say fuel prices won't return to normal overnight. That's particularly challenging for smaller carriers like JetBlue, which hasn't turned a profit since 2019.

"Even if the war were to end, we're not planning for oil prices to snap back overnight," said Joanna Geraghty, JetBlue's CEO, speaking with Bloomberg at the IATA meeting in Brazil. "We think it's going to be a longer, protracted sort of unwind of the escalated fuel prices."

United Airlines CEO Scott Kirby says the airline has been able to recoup less than half of its increased fuel costs so far, but he expects that number to climb as the price of fuel declines. And Kirby predicted that airfares would stay higher into next year.

"The longer this lasts, the higher the probability goes that the pricing increases hold," Kirby said during a United earnings call in April. "If things went back to mid-February normal, I think we get [to] keep 20% of the price increase next year."