High jet fuel prices could put a damper on your summer travel plans

price Jet fuel has doubled since the start of the Iran war two weeks ago, as disruptions in vital shipping lanes limit global trade in crude and refined oil. The airlines operating it are racing to keep up. Jet fuel alone represents between 25 and 35 percent of airline costs. Next stop is higher ticket prices.

It’s already happening, to some extent. Several airlines, including AirAsia and Hong Kong Airlines, have explicitly said they are adding to the usual fuel surcharges. Domestic ticket prices in the United States rose (although they had been rising before the war as well). “when [the oil price] “Ticket prices go up so quickly, airline ticket prices go up. And by the way, they also go down when gas runs low,” United Airlines CEO Scott Kirby told the Wall Street Journal this week.

Since no one has a crystal ball, what all this means for travelers is up in the air. Travel and aviation industry experts say it will take several more weeks of conflict and rising fuel prices to really start to reshape the economics of travel — or even see if that’s happening. Airlines set tentative schedules, routes and ticket prices months later, which means the money they lose today due to higher costs may only be recouped through ticket sales for future flights.

Here’s what’s likely going on behind the scenes at airlines that will decide whether higher fuel prices translate into scrambled travel plans.

Travel versus leisure

For now, airlines are likely to adjust operations limits and ticketing plans, says Ahmed Abdel-Ghany, who studies airline operations as a professor at Embry-Riddle Aeronautical University’s School of Business. Some of these changes will likely not be noticeable to the average pilot. To make flights more fuel efficient, for example, and less expensive to operate, airlines have likely already limited the amount of fuel carried on each flight, he said – meaning less weight and less fuel burned. Raising ticket prices is a logistically easier move for airlines, but it is not an automatic move.

“We say that airlines have three demons: fuel price fluctuations, demand fluctuations, and weather fluctuations,” says Abdel-Ghani. “For airlines to raise prices, this is not an easy decision, because it will affect demand.”

In fact, many airlines can shield regular vacationers from the brunt of rising prices, initially, because they believe some demand will persist despite the higher prices. Since the disruptions that have come with the Covid-19 pandemic, many major airlines have reorganized their business models to focus on business fliers, who tend to be less price sensitive as they fly on company fees. “There is a greater focus on premium travelers and driving sales, as opposed to a model that was more domestically focused and had a larger share of business from the main cabin,” says Garrett Bellos, managing director of transportation, space and defense at S&P Global Ratings. Airlines can choose to pass higher prices to higher-spending passengers first.

So the tickets least affected by short-term price increases may be the ones that leisure travelers are more likely to take: trips that start and end on weekends, or last for a couple of weeks rather than a few days (which read “business trip”).

But there’s no guarantee that airlines will stick to this strategy if high fuel prices continue, Bellos says. Newer theories about sustainable demand for business travelers during a real financial crisis have not been tested. “We haven’t actually seen a sustained decline in demand or a price shock in a long time,” he says.

New world

If the jet fuel price shock lasts weeks or even months, bigger changes — and disruptions — could be headed to an airline near you. Airlines may reduce their schedules, targeting less profitable routes to get started. (They can also cancel flights that pass through the unstable airspace around the expanding conflict.)

During the last large, sustained fuel shock in 2008, airlines charged fees for checked and eventually carry-on bags. Although the airline industry has changed since then, it is possible that airlines will once again begin experimenting with new ways to make extra money from fliers. “New additional revenues, fees, charges, and perhaps a reduction in the weight limit for check-in bags may be possible,” says Abdul-Ghani. But this type of new system will take some time to implement.

Pleus, the analyst, stopped short of offering advice on purchasing tickets. “The risk of rising prices has certainly increased compared to a few weeks ago,” he says. “How far they will go, if at all, remains to be seen.”