Jet fuel prices have been rising as the Iran war disrupts global oil supplies, and experts say airfares are likely to increase as that higher cost works through airline pricing. The impact may be felt most on long-haul international routes because they burn significantly more fuel than shorter flights.
Experts said it is not a question of if airfares will go up, but when, for how long and by how much. Some airlines outside the U.S. have announced fare increases or fuel surcharges in an effort to offset the growing expense, while U.S. carriers are warning costs will flow into consumer fares.
United Airlines CEO Scott Kirby said airfare increases “probably start quick” as increasing fuel costs work their way through the industry. Kirby also said at a Harvard event that hedging may not offer the broad protection airlines need, saying, “No one hedges anymore, and even if you do, hedging the crack spread is really hard to do.” He described the “crack spread” as the difference between the price of crude oil and the price of the products produced from it, such as gasoline.
The rise in jet fuel prices is tied to disruption across oil markets. The war has constrained oil exports and prompted major producers, including Kuwait, Saudi Arabia and Iraq, to scale back output as shipments face growing obstacles. Iran has attacked commercial ships across the Persian Gulf and targeted oil infrastructure in Gulf Arab nations following U.S. and Israeli strikes, effectively halting traffic through the Strait of Hormuz, a narrow passage that carries about one-fifth of the world’s oil supply.
Volatile crude oil prices have pushed retail gasoline sharply higher and have had a similar effect on jet fuel. The Argus U.S. Jet Fuel Index reported that the average price reached $3.99 per gallon on Friday, up from $2.50 the day before the war started two weeks earlier. Separately, the U.S. Department of Transportation’s Bureau of Transportation Statistics showed U.S. airlines paid about $2.36 per gallon for fuel in January, the most recent data available.
For airlines, higher jet fuel costs can show up through multiple channels beyond hedging. Some carriers are partially protected from sudden price spikes through fuel hedging, which can let them lock in prices months or even years in advance, but not all airlines hedge and those that do are usually protected only for a portion of their fuel needs. Air space closures have also forced rerouting around parts of the Middle East, which can mean longer routes, additional fuel burn and higher operating costs.
Travelers could see the effects in how airlines price tickets and optional services. Airlines can add or increase fuel surcharges—an extra fee common among carriers outside the U.S.—on top of base ticket prices. But Tyler Hosford, security director at global risk management firm International SOS, said major U.S. carriers do not charge a separate fuel surcharge and instead build fuel costs into the overall ticket price, which means increases are more likely to appear as higher base fares. Airlines may also adjust premium add-ons such as seat upgrades, extra legroom seats, checked bags or priority boarding, and if higher fuel prices persist, carriers may adjust schedules or reduce certain routes, according to Christopher Anderson, a Cornell University professor whose research includes airline and hospitality operations.
Fuel price changes can be significant because fuel is a major part of airline budgets. Rob Britton, an adjunct marketing professor at Georgetown University and a retired American Airlines executive, said fuel typically accounts for 20% to 25% of an airline’s operating costs, making it the second-largest expense after labor. Industry analysts say the eventual fare impact can vary by route, airline and demand, and that fuel costs are likely to affect long-haul international flights most.
Some airlines have already announced changes. Cathay Pacific said it would increase its fuel surcharge starting Wednesday and stated that the price of jet fuel has approximately doubled since March amid the latest developments in the Middle East. Air France-KLM said roundtrip economy fares on long-haul flights could rise by about 50 euros (about $57). Air India introduced fuel surcharges Thursday on certain routes, saying that after March 18 the surcharge will increase by up to $50 for all tickets to Europe, North America and Australia. Hong Kong Airlines increased fuel surcharges across several routes as of Thursday, and FlySafair in South Africa announced a temporary fuel surcharge.
Experts said so far, most fare increases and fuel surcharges are coming from airlines based in the Asia-Pacific region, but they expect more airlines—especially those without fuel hedging—to follow if high jet fuel prices persist. For travelers trying to limit cost increases during the busy summer season, experts said booking earlier rather than waiting for last-minute deals can help, especially when flexible booking options allow changes.
Hosford suggested travelers stay flexible with travel dates, check fares at nearby airports and set alerts for price drops. He also recommended using frequent flyer miles or credit card points to book flights instead of waiting for a “perfect deal,” saying: “If you were going to spend cash on the flight but now you’re not, then that’s a good redemption deal.”