Airline ticket prices are climbing as a sharp increase in jet fuel costs reverberates across the aviation industry, with analysts warning of a potential impact on earnings for U.S. and international carriers. Jet fuel, typically the second-largest expense after labor, now accounts for more than 20% of airlines’ operating costs, amplifying the effect of recent market volatility.

Executives across major carriers report that travel demand remains strong despite the rising costs, suggesting that airlines may have room to pass fuel price increases onto consumers. The surge follows the U.S. and Israel’s military strikes on Iran nearly two weeks ago, which disrupted oil flows and sent crude prices soaring to roughly four-year highs.

Fuel Costs Drive Fare Adjustments Globally

Several airlines have already adjusted pricing to offset higher expenses. Cathay Pacific announced it will nearly double fuel surcharges starting March 18. Qantas, Scandinavian Airlines, and Air New Zealand have all raised fares or altered financial forecasts due to the sudden jump in fuel costs. Air New Zealand noted that if elevated prices persist, it may further adjust ticket prices and flight schedules to maintain profitability.

In the U.S., United Airlines CEO Scott Kirby confirmed that higher fares are likely in response to rising jet fuel prices, though overall travel demand continues to remain strong. Analysts from UBS predict an earnings hit for airlines in the first quarter, with potential effects stretching into the second quarter depending on the duration of elevated fuel costs.

Jet Fuel Market Volatility

The cost of jet fuel has surged more than 60% since the attacks on Feb. 28, creating sharp spikes in operating expenses. For example, filling the tanks of a Boeing 737-800 across major U.S. airports increased from around $17,000 before the strikes to over $27,000 at the peak, and currently sits near $23,000. U.S. jet fuel recently traded at $3.78 per gallon, compared with $2.44 per gallon on average last year.

Airline strategies to manage fuel costs include efficiency measures such as reducing onboard weight and optimizing flight routes. Historical precedents, such as switching in-flight manuals from paper to digital, have saved carriers hundreds of thousands of dollars annually.

Booking Strategies for Travelers

Travel experts advise consumers to book flights early to hedge against rising fares, while avoiding highly restrictive basic economy tickets. Platforms like Going (formerly Scott’s Cheap Flights) suggest that travelers can benefit from flexible ticket policies that allow for refunds or credits if prices drop after purchase.

Airlines may also adjust capacity in response to higher fares. Routes with reduced passenger interest could see fewer flights, while strong demand on international and alternative routes may lead carriers to add flights despite rising fuel costs. For instance, Qantas rerouted flights from Perth to London via Singapore to accommodate additional passengers amid higher fuel expenses, with routes filling to over 90% capacity.

Long-Term Industry Implications

U.S. carriers have largely stopped hedging jet fuel costs, making them more exposed to market swings. Rising energy costs are expected to push fares higher in the near term, potentially influencing travel budgets and consumer behavior. Analysts emphasize that the inelastic nature of airline operations means flights will continue despite higher costs, which are likely to be reflected in ticket prices.

Experts anticipate that if jet fuel prices remain elevated for months, airlines may adjust scheduling, network planning, and capacity to maintain revenue targets. High demand, limited airspace availability due to regional conflicts, and operational constraints are contributing to an environment where fare increases are both necessary and expected.

The current fuel spike underscores the sensitivity of the airline industry to geopolitical events and energy market fluctuations, signaling that travelers should prepare for continued volatility in ticket prices in the months ahead.