High airfares could stick around even if jet fuel prices fall

Las Vegas: Travellers could be stuck paying high airfares even if oil and jet fuel prices fall, major US airlines and industry analysts say.

The price of jet fuel shot up after the Iran war began and retreated sharply in the spring before surging again as the summer went on. Such fluctuations make it harder for airlines to plan ahead and give them a reason to be cautious about lowering ticket prices, according to Brett House, an economist who teaches at Columbia Business School.

Jet fuel has risen even faster than oil during the war, reflecting both higher crude prices and tight supplies of the refined fuel that is one of airlines' largest operating expenses. Carriers cut some less profitable flights and raised fares and baggage fees, although major US airlines said higher passenger revenue initially covered only part of their soaring fuel costs.

Airfares haven't moved in lockstep with fuel prices, however. The Argus US Jet Fuel Index plunged from an early April peak of USD 4.88 a gallon to a wartime low of USD 2.70 in June, but average fares remained elevated.

The average fare, not including optional fees for services such as checked bags and seat selection, rose from USD 405 in the last three months of 2025 to USD 428 in the first quarter of this year and to USD 436 in the April-June period, according to the Bureau of Transportation Statistics.

Part of the disconnect between fuel prices and airfares comes down to timing, House said. Airlines typically decide several months in advance how many flights to operate and seats to offer, factoring in expected fuel costs and other expenses. They begin selling tickets even earlier. While prices for seats on the same flight can change repeatedly, airlines can't charge more for seats already sold if fuel prices suddenly spike, he explained.

“It's not just the level of fuel costs that is a problem or a challenge for airlines,” House said. “It's also the volatility.”

There are few signs of relief so far for travellers as airlines adjust their schedules and prices for the remainder of the year. In August, US airfares were 23 per cent higher than a year earlier, according to the Labour Department. Jet fuel prices kept climbing this month, reaching USD 4.53 a gallon on September 17, according to the Argus index.

At USD 4.30 a gallon on Friday, the average price across the four US markets the index tracks remained nearly twice the 2025 average. Travellers shopping for holiday flights already are encountering the highest airfares in a decade, travel-booking company Hopper said in a report published the same day.

The company, which tracks fares available in flight searches, estimated that during the previous week, a round-trip domestic fare averaged USD 402 for Thanksgiving travel and USD 452 for Christmas, 31 per cent and 23 per cent more than last year.

And the pressure on airlines and travellers isn't limited to the United States. Globally, jet fuel averaged about USD 99 a barrel on February 27, the day before the war began, according to the International Air Transport Association's Jet Fuel Price Monitor. Prices more than doubled to USD 209 by early April, fell for nearly three months and reached USD 195 a barrel in mid-September following their renewed ascent, IATA said, citing data from S&P Global Energy Platts.

Fuel prices can swing overnight while airfares decline more slowly

The renewed pressure on jet fuel prices stems from many of the same disruptions that have sent diesel prices soaring. Fighting has curtailed refinery production and fuel exports from the Middle East, while Ukrainian strikes have damaged Russian refineries. Because diesel and jet fuel are closely related products that compete for refinery output, shortages of one can put additional pressure on the price and availability of the other.

IATA expects fuel to account for nearly one-third of airline operating expenses this year, up from about a quarter in 2025.

By the time fuel prices jumped again, about 35 per cent of United's tickets for the final three months of the year were already booked and the airline could not increase those fares retroactively, Chief Financial Officer Mike Leskinen said. The airline expects to recover its higher fuel costs through revenue but not immediately, he said.

Speaking about the rising price of jet fuel at a September 16 investor conference, Leskinen said, “I don't actually care if it stays high. I just need it to stabilise.”

The time it takes airlines to recoup their costs means travellers may keep paying for a fuel spike even as prices come down. Jet fuel prices need to fall and stay down for airfares to decline on a sustained basis, said Stephen Treanor, a finance professor at California State University, Chico, who has studied airlines' exposure to fuel price risk.

Carriers are responding to the latest swing in fuel prices

The speed with which jet fuel prices rose recently has complicated the forecasts of US airlines. As recently as September 10, JetBlue raised its expected average fuel price for the July-September period to USD 3.96 a gallon. Prices continued climbing afterward, with the Argus US Jet Fuel Index reaching USD 4.53 a gallon a week later and remaining above USD 4.25 with just days left in the quarter.

Every penny per gallon adds about USD 10 million to American Airlines' quarterly fuel bill, Chief Financial Officer Devon May said. Speaking at the same investor conference this month, May said the latest increases would boost the airline's fourth-quarter fuel costs by about USD 1 billion.

American, United and Southwest Airlines have said they are pruning their flight schedules further, particularly on less-profitable routes, due to higher fuel costs. United, for example, pulled some December flights and warned of further cuts in 2027 if fuel remains expensive. American said it expected to grow more slowly next year than it anticipated a few months ago.

Travellers who buy tickets at the last minute are paying a price. The average same-day fare for a one-way domestic Allegiant Air flight jumped 21 per cent in a week, to USD 280 on September 18, according to a Deutsche Bank analysis of flight pricing. The comparable price for a same-day American Airlines fare was USD 463, up 6 per cent.

For travellers holding out for cheaper fares, the wait could outlast the war itself.

“The likelihood that fuel surcharges are going to be rolled back and airfares are going to be brought down is very low over the next few months,” House said.

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