US Airlines Increasing Ticket Prices as Fuel Reaches Record Highs

As fuel prices continue to go up, airlines are starting to feel the impact on their revenues, all major US airlines have said that they will be increasing ticket prices to offset this.

Fuel is one of an airlines biggest operating expenses, it accounts for 15-20% of a carrier’s total operating cost. Since late February fuel prices have only been going up, the expected fuel price for March was 2.45 to 2.50 per gallon, in reality, it’s 2.60 to 2.65 per gallon, almost a 10% rise. Global crude oil benchmark, Brent crude is up 26% percent. Before the rise in price a Boeing 737 cost $24,000 to fill up, it now costs about $36,000, this is a 50% rise.

The big three (American Airlines, Delta and United) have all said they would be raising their ticket prices to counter this, they also released lower capacity plans for Q2.

Delta said they would be raising prices about $15-20 each way on a ticket and that this less than 10% of the average fare. United noted that it needed TRASM (total revenue per available seat mile) to increase and would also be recouping costs through ancillary sales (e.g. upselling economy passengers to premium seats). American Airlines said that the current demand was unprecedented and that bookings were incredibly strong, it even had three consecutive days in which revenue from new tickets sales set new daily records for the airline. Southwest stated that their practice of hedging some of their fuel needs will allow them to be less impacted, however they have also raised their ticket prices.

Typically, it takes 60 to 90 days for fuel prices to reflect in airfares, but surging travel demand as a result of restrictions being removed coupled with a shorter booking curve (people booking less in advance) means that the increases could be implemented sooner than normal.

Airlines are also cutting routes which with the new prices would see tight profit margins evaporate, though this is only for some of their routes or extra frequencies.