A One-Way Ratchet
Travellers hoping for cheaper flights once fuel prices ease may be disappointed. Senior executives at major US carriers have made it clear that ticket prices are unlikely to fall even if the cost of jet fuel declines, signalling a shift in how airlines think about pricing.
Devon May, chief financial officer at American Airlines, told analysts this week that fares would probably hold steady if fuel prices dropped. If fuel costs climbed further, however, the airline would raise prices to cover the difference. The logic is straightforward: airlines see current fare levels as overdue corrections for years of inflation, not temporary surcharges tied to fuel.
Jet fuel prices have more than doubled since late February, driven by disruptions linked to conflict in Iran. That has forced carriers to lift fares across the board. Average base fares in the United States rose from 405 US dollars in the final quarter of 2025 to 428 dollars in the first three months of this year and 436 dollars in the second quarter, according to the Bureau of Transportation Statistics.
Yet May argued that those increases still leave airlines below where they should be in inflation-adjusted terms. He described 2024 as a year of oversupply, when too many flights chased too few passengers, preventing carriers from raising prices in line with broader cost pressures. Only in the past year, he said, have airlines been able to push yields back to levels last seen seven years ago in real terms.
Volatility Hurts More Than the Price Itself
Fuel volatility compounds the challenge. Airlines sell tickets months before departure, locking in revenue while costs remain uncertain. Brett House, an economist at Columbia Business School, noted that it is not just the absolute level of fuel costs that troubles carriers but the unpredictability. Planning becomes difficult when prices swing sharply from one quarter to the next.
Mike Leskinen, chief financial officer at United Airlines, echoed that sentiment at an investor conference last month. He said the airline did not particularly care whether fuel stayed expensive, as long as prices stabilised. The comment underscores a broader industry view: predictability matters as much as affordability.
American Airlines reported a 19 per cent rise in third-quarter revenue compared with the same period last year, driven by stronger business travel and more passengers paying for premium seats. But higher fuel costs added 1.9 billion dollars to its expenses, forcing the carrier to lower its profit forecast and warn of a potential loss of between one and 1.60 dollars per share for the year.
Delta Air Lines also trimmed its outlook despite a 16 per cent revenue increase in the third quarter. United Airlines absorbed a 1.8 billion dollar hit from fuel but recouped 72 per cent of that through fare increases.
Demand Holds, for Now
Despite rising prices, passengers continue to book. Delta reported lifting fares by roughly 20 per cent without a noticeable drop in demand. Premium cabins, airport lounges and ancillary services have helped cushion the blow for carriers, generating revenue even as some travellers balk at higher economy fares.
Holiday travel offers a snapshot of the current market. According to Hopper, a travel-booking platform, round-trip domestic flights in the United States are averaging 402 dollars for Thanksgiving, up 31 per cent from last year, and 452 dollars for Christmas, up 23 per cent. Hotel rates for Christmas are averaging 197 dollars per night, an 18 per cent increase, while Thanksgiving hotel rates have held steady at 170 dollars.
The data suggests that demand remains robust, at least for now. Whether that resilience lasts if fares climb further, or if economic conditions weaken, is an open question.
The Inflation Argument
Airlines frame the current fare environment as a long-overdue adjustment. May's comments suggest carriers believe they absorbed too much cost pressure in 2024, when competitive dynamics and excess capacity prevented them from raising prices. The pandemic disrupted pricing norms, and airlines are now catching up.
That narrative may offer little comfort to travellers. From a passenger's perspective, the message is simple: fares are unlikely to come down, and they may well go up. The asymmetry is stark. Fuel price increases translate quickly into higher tickets. Fuel price decreases do not translate into lower ones.
What It Means for Travellers
The outlook for airfares depends less on fuel markets than on airline strategy. Carriers have signalled they will defend current price levels to protect margins and recover costs they believe were deferred. That stance reflects confidence in sustained demand, particularly for premium products and business travel.
For passengers, the implication is straightforward. Booking early may offer some advantage, but the broader trend points toward higher baseline fares. Airlines are treating the recent price increases as a floor, not a ceiling, and the industry's capacity discipline suggests little pressure to compete on price in the near term.
Fuel may be a convenient explanation for fare increases, but it is no longer the only one. Airlines are repricing the entire flying experience, and they see little reason to reverse course.
