Higher fuel prices are testing how badly consumers want to travel this summer, whether flying or driving.
Airfare hasn’t been this high since May 2022, when airlines stumbled out of the pandemic with aircraft and employee shortages to face hordes of consumers ready for “revenge travel.” Gasoline is above $4 a gallon and could get closer to $5 a gallon this summer, AAA warned this week.
Jet fuel prices doubled in the span of less than three months this year after the US and Israel attacked Iran, kicking off a conflict that has left a key shipping channel effectively closed.
Domestic round-trip airfares in April averaged $623, the highest in nearly four years, according to data from the Airlines Reporting Corporation, which tracks travel agency ticket sales. Jet fuel is the second-biggest expense for airlines after labour, and carriers say they are increasingly passing those costs along to customers.
Separately, airlines are also trimming their growth plans because of higher fuel costs. Even if a route isn’t cut, fewer flights on certain routes means that customers will have fewer seats to choose from and, with demand robust, that could drive up prices even more.
Spirit Airlines, the most famous budget carrier in the US, shut down earlier this month, and partially blamed jet fuel prices for its failure to emerge from near back-to-back bankruptcies. It was the biggest US airline collapse in decades. Other airlines swooped in to snatch up those customers in the aftermath, but the carrier’s demise removes a main purveyor of low fares.
The fuel spikes have set the stage for higher fares and more expensive gas station visits this summer. The start of the peak travel season Memorial Day weekend will be a taste of how much travellers will shell out to fly while everything from groceries to clothing has become more expensive this year.
The Transportation Security Administration said it expects to screen 18.3 million people between Thursday and next Wednesday, compared with the 18.5m it saw over a similar period last year.
Road trips won’t be a bargain either. AAA this week forecast 39.1m people will drive at least 50 miles between Thursday and Monday, up just 0.1pc compared with last Memorial Day weekend. That was the least growth in a decade, AAA told CNBC.
Gasoline price site GasBuddy forecast this week that prices across the US will average $4.48 on Memorial Day, up from $3.14 last year, and that prices could average $4.80 through Labour Day “if the Strait of Hormuz remains closed for a significant portion of the summer.”
Leisure travel intentions in the US were slightly lower in March – at 82.8pc compared with 83.1pc the same month a year earlier – though they are still relatively high, UBS said in a note.
So far, airline executives said, customers are still booking, and executives are optimistic about the summer travel season. They’ve also said they’re expecting a boost from the FIFA World Cup, which will be held in June and July in the US, Canada and Mexico, and from major concerts such as Harry Styles’ residencies in Amsterdam and London this summer.
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