United Airlines CEO Scott Kirby informed ABC News on Wednesday that the ongoing U.S.-Iran conflict and the resulting surge in jet fuel prices are expected to drive up domestic summer airfares.
Kirby stated to ABC that ticket prices will need to increase by 20% to counter the over 80% rise in jet fuel prices since the conflict started at the end of last month. He advised travelers to secure their ticket prices now to avoid higher fares later.
In a related report, Bloomberg referenced data from research firm Alton Aviation, revealing a significant increase in long-haul summer airfares. For instance, June fares on key Asia-Pacific-to-Europe routes have risen by 70% compared to a year ago, with some routes experiencing even more substantial hikes: Hong Kong to London up by 560%, Bangkok to Frankfurt up by 505%, and Sydney to London up by 429%.
Data from Cirium indicated that demand for summer travel is starting to decline. Bookings for June travel from Europe to the U.S. have dropped by 15% compared to the same period last year, while bookings in the opposite direction have decreased by 11%. Bookings from Asia to Europe also saw a decline of 4.4%, including routes that pass through the Middle East.
Bryan Terry, a managing director at Alton, warned that the current pricing shock is not just temporary. He mentioned that even as the initial disruption subsides, longer routings, limited capacity, and higher fuel costs will continue to put upward pressure on prices for an extended period. It could take up to three months for price reductions to reflect in the jet fuel supply chain.
Analysts from Deutsche Bank and UBS have cautioned that airlines might have to reduce capacity to offset the spike in jet fuel prices. The combination of reduced capacity and increased fuel costs could lead to a decrease in travel demand this summer as consumers face higher ticket prices.
Despite the challenges, UBS analyst Atul Maheswari sees a possible bottom in the industry.