Fuel crisis set to wreak havoc on summer vacations
United Airlines CEO Scott Kirby is cautioning travelers that the recent surge in jet fuel prices may soon lead to higher ticket costs.
Speaking at an event at Harvard University, Kirby noted, “No one hedges anymore, and even if you do, hedging the crack spread is really hard to do. Airfare increases will probably start quick.”
The “crack spread” measures the difference between crude oil prices and the price of refined products like gasoline and jet fuel. It’s an important indicator for both oil companies and airlines, showing the potential profit from refining crude into usable fuel and helping businesses anticipate price swings.
Kirby’s warning comes as jet fuel prices climb amid growing instability in the Middle East following the US-Israeli conflict in Iran. Analysts say these rising costs could translate into higher airfares, new fees, and potentially fewer flight options, just as the busy summer travel season approaches.
Fuel prices have jumped sharply in recent weeks. The national average price for regular gasoline in the U.S. recently reached $3.69 per gallon, up from just under $3 per gallon before the conflict, according to industry data. California has been hit particularly hard, with prices increasing by nearly a dollar in the past month. The current statewide average there is $5.509 per gallon, up from $4.582 a month ago. In just one week, prices climbed from $5.159 to $5.483 per gallon.
Fuel is one of the largest operating costs for airlines, typically accounting for 20% to 25% of total expenses. When prices rise sharply, carriers often have little choice but to pass some of that increase onto passengers.
Many airlines partially protect themselves from price swings through fuel hedging—contracts that lock in fuel costs months or even years ahead—but most are not fully insulated from sudden surges. The recent rise in jet fuel costs has been fueled in part by Middle East tensions, including attacks on commercial shipping and oil facilities that have disrupted the Strait of Hormuz, a key route carrying roughly one-fifth of global oil.
These disruptions have driven crude prices higher and created supply challenges, especially in California, where refining capacity is already limited. Some refineries, including those operated by Phillips 66 in Carson and Valero in Benicia, have reduced operations in recent years. California also mandates a specialized, cleaner-burning gasoline blend and imposes some of the highest fuel taxes and regulatory costs in the country, which amplifies price increases when global markets are unstable.
Airlines may respond to rising fuel costs in several ways. While most U.S. carriers incorporate fuel expenses into ticket prices, international airlines often add fuel surcharges. Additional fees for seat upgrades, checked baggage, priority boarding, or other premium services may also increase.
Some carriers have already adjusted pricing. Hong Kong–based Cathay Pacific reported that jet fuel costs have roughly doubled since the recent Middle East tensions escalated, prompting a fuel surcharge increase. Other airlines making similar adjustments include:
-
Air France-KLM: Certain long-haul round-trip economy fares could rise by about €50.
-
Air India: Introduced fuel surcharges up to $50 on several international routes.
-
Hong Kong Airlines: Raised fuel surcharges on multiple routes.
-
FlySafair (South Africa): Announced a temporary fuel surcharge.
Travelers can expect these rising fuel costs to affect airfare and additional fees in the coming weeks, potentially altering travel plans this summer.
About Post Author
