US airlines raise prices, and travelers continue to book

Jet fuel prices have risen this year since attacks on Iran that began two months ago effectively closed the Strait of Hormuz. For now, airline executives say passengers are still flying, and increasingly covering the bill.

The price hike occurred just before spring break and has eroded airline profits this year. But booking trends show resilient consumers are prioritizing travel, and executives have a bright outlook for the peak summer demand months, which now end in August. There are still questions about how demand will sustain until the end of the year given that travelers tend not to book well in advance.

In March, travel agency ticket sales rose 12% from a year ago to $10.4 billion, with the number of domestic flights up 5% and international ones up 1%, according to Airlines Reporting Corp.

Domestic economy fares rose 21% from a year earlier to an average of $570, while premium seat prices rose 17% to an average of $1,444 per flight, according to ARC data released April 16.

Despite the price increases, “bookings have remained resilient amid these changes, which is an encouraging sign.” JetBlue Airlines CEO Joanna Geraghty said Tuesday on an earnings call.

US airlines report that the Iran war is adding more than $6 billion to their costs this year.

But JetBlue and the major carriers told Wall Street this month that they expect customers to cover higher jet fuel costs by early 2027, if not the end of this year. Airlines have reduced their ability to cut costs, which could also boost airfare prices.

JetBlue on Tuesday expected second-quarter revenue to increase as much as 11% from a year earlier even as Geraghty described the impact of the war as the biggest headwind for the industry since the Covid pandemic.

American Airlines It said Thursday it expects a 13.5% to 16.5% increase in second-quarter revenue.

“We’ve always been really aggressive about managing our load factors, and we see our loads keeping pace with added capacity,” U.S. CEO Robert Isom said on an earnings call. “This suggests we are seeing the real benefit in yields right now.”

Delta Airlines and United AirlinesAirlines, which make up the majority of U.S. industry profits, were also optimistic about price growth, especially since airlines rely more on growth from seats like first class or premium economy that can cost thousands of dollars more than economy class options.

Domestically focused low-cost airlines, which tend to have fewer premium options, have suffered. Budget airlines represented by the Value Airlines Association, incl Frontier Airlines Two airlines and Avello are seeking $2.5 billion in relief from the Trump administration to help cover the jump in fuel prices, the group said Monday.

border It is scheduled to update Wall Street analysts next week on its forecasts for the year and is likely to face questions about its ability to recover costs at lower average prices than larger rivals.

Even if oil prices fall, it is unlikely to mean immediate relief for jet fuel prices, since this product includes refining and transportation costs that take longer to show up.

“It is particularly likely that airfares have grown well below headline inflation since Covid” and that prices will remain high, Atul Maheswari, an airline analyst at UBS, wrote on Monday. “As such, we believe there is room for airfares to rise and stay higher. This could lead to significant earnings growth and margin expansion for airlines in 2027 if jet fuel prices moderate. However, we believe demand will need to remain steady for airlines to maintain prices next year.”