Key facts
- US domestic airfares have increased by 26.5% year-over-year, with global fares up 25-30% compared to 2025.
- Jet fuel prices have risen 65% since the start of 2026, trading around $149 a barrel.
- Crude oil prices have increased by approximately 30% since January, currently around $76 a barrel.
- Reduced global oil refining capacity and strong travel demand are key drivers of elevated jet fuel costs.
- Capacity constraints at aircraft manufacturers and FAA staffing issues are limiting flight availability.
- Airlines are leveraging the US-Iran conflict to justify passing increased costs to consumers.
US airfares are expected to remain elevated despite potential decreases in oil prices due to a ceasefire in the US-Iran conflict, according to industry experts. Domestic airfares have surged 26.5% year-over-year, with global prices up 25-30% compared to 2025, driven by strong travel demand and reduced global oil refining capacity.
Jet fuel prices, a significant operating cost for airlines, have seen a substantial increase, rising 65% since the start of 2026 to approximately $149 a barrel, while crude oil prices are up about 30% since January, trading around $76 a barrel. This disparity is attributed to the limited output of jet fuel from refined oil and a substantial number of refinery closures. While some adjustments are being made to increase jet fuel production, prices remain volatile.
Airlines have limited ability to control these costs, with some hedging fuel expenses and others buying on the spot market. Capacity constraints from aircraft manufacturers like Boeing and Airbus, coupled with staffing issues at the US Federal Aviation Administration (FAA), have also led to fewer flights. Experts suggest that airlines are using the ongoing US-Iran conflict as an opportunity to pass increased costs onto consumers, a strategy facilitated by persistent travel demand.
While demand for jet fuel may decrease as the summer travel season concludes, a lasting ceasefire could lead to price normalization, though this process might take a year or more, similar to the impact of Russia's invasion of Ukraine. Current US jet fuel inventories are also noted to be at the lower end of a five-year average. Legacy carriers have reported that higher airfares have helped offset rising fuel costs, but forecasting remains challenging due to price volatility. Many airlines are not highly profitable, relying on cash flow and revenue to survive.
Analysts do not anticipate significant reductions in airfares within the next year due to insufficient capacity to foster price wars. The closure of Spirit Airlines has reduced competition, potentially leading to higher fares for travelers. Current trends show Thanksgiving fares are up 19% compared to 2025, signaling that significant price drops are unlikely.