Jet fuel prices have shot up 40% to 50% over last year, but airline passengers in the U.S. don’t need to worry about airfares following that trend — yet.
Two of the nation’s largest airlines warned this week that rising fuel prices are cutting into their profits but suggested that air travelers probably will not feel the pinch of higher ticket prices for several months, and that will only happen if fuel costs remain high.
At a meeting in Australia of an international airline trade group, American Airlines Chief Executive Doug Parker told reporters that fuel prices have jumped 40% for his carrier but for now the airline will continue to absorb the higher cost.
“If it becomes clear that this is the new normal, you would see over time less capacity growth in the industry, therefore higher prices,” he said. “I don’t think it’s going to happen in the very near term.”
Meanwhile, Delta Air Lines told federal regulators that revised earnings of the three months beginning in June probably will be $1.75 per share instead of $2, as it previously predicted. The airline cited fuel costs that have jumped 50% since last year. The airline said the higher revenue needed to make up for the rising fuel costs will likely lag six to 12 months.
In other words, airlines may absorb the higher cost for several months before they pass it along to air travelers, according to industry experts.
In addition to raising airfares, airlines may try to boost passenger fees such as seat assignment charges or add a fuel surcharge to pass along the higher fuel cost. This will make it appear on travel booking sites that airfares have not increased, said Henry Harteveldt, an airline analyst with Atmosphere Research Group.
“Airlines know that it is a very competitive market and consumers are very price-sensitive,” he said.
An alternative way to raise revenue — as suggested by Parker — is for airlines to cut back on the number of seats for sale, which will gradually push airfares higher, said Seth Kaplan, managing partner at Airline Weekly.