Jet fuel prices and airfares are rising. Travelers are still booking flights, US airlines say

U.S. airlines are weathering the storm of rising fuel costs sparked by the Middle East conflict, with executives reporting that robust ticket sales are offsetting the financial impact.

Jet fuel prices have surged dramatically since the outbreak of war on February 28, climbing to $3.93 per gallon on Tuesday—a steep increase from $2.50 the day before hostilities began, according to Argus Media. The conflict has strained global oil supplies, particularly around the Strait of Hormuz, a critical chokepoint through which approximately one-fifth of the world’s oil passes.

Delta Air Lines CEO Ed Bastian revealed that higher fuel costs have added roughly $400 million in additional expenses for the carrier. Executives from American Airlines and United Airlines reported similar financial impacts during presentations at the annual J.P. Morgan Industrials Conference on Tuesday.

Despite these challenges, all three major carriers indicated that consumer demand for air travel remains exceptionally strong across all market segments.

“It’s across all segments, covering corporate, covering international, covering premium leisure, covering main cabin, covering our domestic system,” Bastian explained. “We’re seeing strength in every market that we look at.”

The Delta CEO noted that eight of the airline’s top 10 days for ticket sales have occurred this year, with five of those happening since the conflict began. This pattern suggests consumers may be rushing to secure tickets before inevitable price increases take effect.

United Airlines is experiencing a similar surge, with CEO Scott Kirby reporting that the first 10 weeks of 2023 represented the carrier’s strongest ticket sales period on record, with the most recent two weeks showing particularly impressive numbers.

Not to be outdone, American Airlines CEO Robert Isom stated that eight of his carrier’s best 10 days and weeks for bookings also occurred this year. He expressed confidence that this high demand would continue through the spring months of April and May.

Industry analysts indicate that fare increases are inevitable given the sustained rise in fuel costs, which typically represent about a quarter of airlines’ operating expenses. The timing, duration, and extent of these increases remain the only unknowns. Long-haul international routes, which consume significantly more fuel than domestic flights, may see the most substantial price adjustments.

Several international carriers have already implemented fuel surcharges or raised base ticket prices in response to the situation. U.S. airlines, which generally don’t employ explicit fuel surcharges, are more likely to incorporate these costs into their base fares or adjust fees for optional services such as seat upgrades.

Some airlines employ fuel hedging strategies—contractual tools that lock in fuel prices months or years in advance—providing partial protection against sudden price fluctuations. However, not all carriers utilize this approach, and those that do typically hedge only a portion of their fuel requirements. This means that prolonged price increases could eventually force more widespread fare adjustments across the industry.

If fuel prices remain elevated for an extended period, airlines may take additional measures to control costs, including adjustments to flight schedules or reductions in service on certain routes.

“We’re certainly going to be nimble in terms of capacity to make sure that supply and demand stay in balance,” Isom said, suggesting American Airlines is prepared to make operational adjustments if necessary.

For now, the extraordinary demand for air travel is providing U.S. carriers with a buffer against rising costs, though travelers should prepare for potential fare increases as the busy summer travel season approaches.