Airlines warn of higher holiday airfares as fuel costs prompt flight cuts

Key facts

• Airlines are cutting planned holiday flights and may raise fares due to high fuel costs.
• Jet fuel prices are $4.53 a gallon.
• Airfares increased over 23% year-over-year in August.
• United Airlines has already reduced some routes and may cut more flights in December.
• Southwest and American Airlines executives indicated they would trim capacity and raise fares if fuel prices remain elevated.
• The pass-through of higher jet fuel prices to consumers occurs with a lag.

Airlines are preparing to reduce flight options and increase fares for the upcoming holiday season as sustained high fuel costs pressure profitability. Executives from major carriers, including United Airlines, Southwest Airlines, and American Airlines, indicated that persistent oil prices, which have recently surpassed $100 a barrel, will necessitate schedule adjustments and fare hikes.

United Airlines CFO Mike Leskinen noted that while demand remains strong, the company has already cut some less profitable routes and may reduce additional flights planned for December if fuel prices do not decrease. He also stated that the pass-through of higher jet fuel costs to consumers occurs with a lag. Southwest Airlines CFO Tom Doxey and American Airlines CFO Devon May echoed similar sentiments, suggesting capacity would be trimmed and fares raised in response to elevated fuel prices.

Data from the Bureau of Labor Statistics showed that airfares rose by more than 23% year-over-year in August. Travel analyst Sally French from NerdWallet pointed out that beyond airfares, airlines have also increased checked-bag and seat-selection fees, contributing to a higher overall cost of flying. The specific routes and flights that may be cut remain unclear, but airlines historically target oversaturated markets, less busy travel days, or flights with less desirable times. Some airlines may also prioritize business-heavy markets with strong corporate demand, particularly long-haul international routes, banking on affluent customers remaining resilient to price increases.