Experts indicate it’s not a matter of if airfares will increase, but when, for how long, and by how much. The effect is likely to be most pronounced on long-haul international routes, which consume significantly more fuel than shorter flights.
Several airlines outside the US have announced fare hikes or fuel surcharges to mitigate rising costs. In the US, United Airlines CEO Scott Kirby recently cautioned that airfare increases will “probably start quick” as escalating fuel costs permeate the industry.
The ongoing conflict is restricting oil exports and compelling major producers such as Kuwait, Saudi Arabia, and Iraq to cut back on output as shipments encounter escalating challenges.
Iran has launched attacks on commercial vessels in the Persian Gulf and has targeted oil infrastructure in Gulf Arab countries in response to US and Israeli strikes. These assaults have effectively blocked traffic through the Strait of Hormuz, a narrow passage that facilitates approximately one-fifth of the global oil supply.
The fluctuating crude oil prices, causing retail gasoline prices to spike, are similarly affecting jet fuel costs. As of March 13, the average price in the US reached $3.99 per gallon, rising from $2.50 just before the war commenced two weeks prior, according to the Argus US Jet Fuel Index, which tracks average prices airlines incur for jet fuel across major US airports.
Data from the US Department of Transportation’s Bureau of Transportation Statistics reveals that US airlines paid about $2.36 per gallon for fuel in January, the latest data available.
Some airlines are partially shielded from abrupt price increases through fuel hedging, a strategy that enables them to lock in fuel prices months or even years ahead. However, not all airlines hedge, and those that do generally only cover a portion of their fuel needs, indicating that 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 challenging to manage,” Kirby stated at a Harvard event last week. The crack spread refers to the difference between the price of crude oil and the prices of its refined products, such as gasoline.
Additionally, airlines are facing challenges as airspace closures necessitate rerouting flights in the Middle East, potentially leading to longer routes, increased fuel consumption, and higher operational costs.
Travelers may experience the effects in various ways.
Airlines might add or increase fuel surcharges, an additional fee often imposed by carriers outside the US, added atop the base ticket price.
However, major US carriers typically don’t charge a separate fuel surcharge. Instead, they incorporate fuel costs into the overall ticket price, making any increase more likely to appear as a higher base fare for travelers, according to Tyler Hosford, security director at global risk management firm International SOS.
Airlines may also modify their charges for premium add-ons — such as seat upgrades, extra legroom options, checked bags, or priority boarding — as a way to offset rising operational costs. For consumers, this means that even if the base fare doesn’t increase immediately, the overall cost of a trip could still rise once additional fees and upgrades are included.
Should fuel prices remain elevated, airlines might also revise their schedules or reduce specific routes, according to Christopher Anderson, a professor at Cornell University’s business school whose research focuses on operations and information management in the airline and hospitality industries.
Predicting the exact increase in ticket prices resulting from more expensive oil and fuel is challenging. Industry analysts note that the impact of increased jet fuel costs can differ depending on the route, airline, and travel demand.
Fuel generally accounts for 20% to 25% of an airline’s operating costs, making it the second-largest expense after labor, as stated by Rob Britton, an adjunct marketing professor at Georgetown University and a retired American Airlines executive. Consequently, sharp increases in fuel prices can significantly impact airline budgets.
Currently, most fare hikes and fuel surcharges are originating from airlines based in the Asia-Pacific region, but experts anticipate that more airlines — especially those lacking fuel hedging — will follow suit if elevated jet fuel prices continue.
Cathay Pacific, Hong Kong’s flag carrier, announced it would raise its fuel surcharge beginning Wednesday.
“The price of jet fuel has nearly doubled since March amid the recent events in the Middle East,” the airline stated in a Thursday announcement.
Other airlines implementing price increases or new surcharges include:
— Air France-KLM indicated roundtrip economy fares on long-haul flights could rise by around 50 euros (approximately $57).
— Air India initiated fuel surcharges Thursday on certain routes, announcing that after March 18, the surcharge would increase by up to $50 for all tickets to Europe, North America, and Australia.
— Hong Kong Airlines raised fuel surcharges across various routes effective Thursday.
— FlySafair in South Africa announced a temporary fuel surcharge.
Experts suggest that travelers planning summer trips may mitigate the impact of rising airfares by booking earlier rather than relying on last-minute deals.
Locking in ticket prices sooner — particularly with flexible booking options that allow for changes — can assist in securing lower prices before airlines further adjust rates.
Hosford, the security director at International SOS, recommends that travelers maintain flexibility with travel dates, check fares at nearby airports, and set alerts for price reductions. He also advises using frequent flyer miles or credit card points to secure flights instead of waiting for a “perfect deal.”
“If you were going to spend cash on the flight but now you’re not, then that represents a good redemption deal,” he noted.
