Jet fuel prices have dropped sharply over the past two months, yet airlines are not planning to reduce fares or fees. According to a recent CNN report, the cost of jet fuel roughly doubled during the early weeks of the Iran war, prompting carriers to raise ticket prices, cut flights, and increase baggage fees. However, even as fuel costs have fallen by 40% since their April peak, airlines are keeping fares elevated.
Delta CEO Ed Bastian stated that fares are at the “right level” despite “meaningfully” lower fuel costs. The primary reason for sustained high fares is strong consumer demand, especially during the busy summer travel season. Airlines have also reduced the number of available seats by eliminating less popular, lower-fare flights. The closure of Spirit Airlines in May further tightened capacity.
Deutsche Bank Securities data shows that virtually all fares are up 15% to 20% from a year ago, with airlines implementing eight price increases since spring. Airline executives have made it clear that ticket prices are driven by market conditions—supply and demand—rather than fuel costs. Southwest Airlines CEO Bob Jordan noted during an April earnings call that fares are “going to be dictated by market conditions, not by some academic formula.”
While the fuel spike earlier this year was costly—the three largest U.S. airlines spent $1 billion more on fuel in the second quarter alone—analysts say carriers will more than cover that expense. Many airlines, especially smaller discount carriers, still need extra cash to return to sustainable profitability after the COVID-19 pandemic.
United Airlines chief commercial officer Andrew Nocella told investors, “The longer consumers pay these prices and airlines get used to this revenue stream, the more likely it is to stick.” Some cheaper tickets may appear in the fall, but that is typical after the summer travel season. Experts still expect fares to remain higher than last year.
Passengers are resigned to the situation. Travelers at Newark Liberty International Airport expressed frustration but not surprise. Ban Morel, who paid $100 in baggage fees on top of a $400 round-trip ticket to Puerto Rico, said, “Everything always goes up in price, but it never seems to come back down.” Another traveler, Michael Boenisch, remarked, “Air travel is the one thing that has gotten worse in my lifetime.”
Despite the higher costs, some families are not cutting back. Shané Harris, traveling with her husband and son, has three more trips planned this summer. “It’s a necessary thing,” she said.
