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February 21, 2024
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Airline customers in the US can expect ticket prices to be up by some double-digit numbers in the coming months as US airlines will pass on higher fuel prices. They follow a trend seen in other regions of the world, where airlines have responded to the soaring oil prices following the outbreak of the war in Ukraine on February 24. Fuel costs push ticket prices up in solid US market.

Rising fuel costs were a topic during the first day of the JP Morgan 2022 Industrials Conference on March 15. Delta Airlines gave the clearest indication by saying that one-way ticket prices will be up by $15-20 this quarter to compensate for higher fuel expenses. In its previous guidance for the March quarter, Delta expected a price of $2.35 to $2.50 per gallon. The updated guidance takes an average price of $2.80/gallon into account. JetBlue has upped its fuel price from $2.59 to $2.89 per gallon.

American Airlines has updated its guidance to between $2.73 and $2.78 per gallon, but United Airlines doesn’t rule out $2.99 per gallon, based on March 4 fuel prices. They are fluctuating very much, said United Chief Financial Officer Gerry Laderman, referring to drastic day-by-day changes last week, at one time hitting $4.00 before settling down to around $3.10-3.20.
Despite the fluent situation, Southwest Airlines has kept its fuel price guidance unchanged at $2.25-2.35. That’s because it is 65 percent hedged on fuel whereas American and JetBlue haven’t hedged fuel and United even opposes it.

Capacity down on previous guidance

With higher fuel prices likely to impact demand, the US carriers have also revised their capacity for the current first and the second quarter. American expects Q1 capacity to end at -10 to -12 percent compared to 2019 levels, versus -8 to -10 percent in the previous guidance. United is projecting capacity for Q1 around -19 percent of 2019 levels. For Q1, Delta is at -17 percent versus -17 to -15 percent, Southwest at -9 to -10 percent compared to -9 percent. JetBlue is the most optimistic with capacity at just -1 percent in Q1 versus -1 and +2 percent in its previous guidance.

For the full year, Delta is forecasting capacity to be down by a high single-digit number, while Southwest maintains its guidance of -4 percent to 2019 levels. JetBlue will reduce capacity in May by -6 to -8 percent but isn’t offering any further outlook for the summer period and beyond. Delta expects to rebuild capacity in the second half of the year and end on an average of -10 percent of 2019.

Bookings are very strong in recent weeks

And that’s the other side of the coin: while higher fuel prices might affect bookings, they actually have been very strong in recent weeks. JetBlue reported very strong demand, resulting in much better revenues than it had anticipated. In its previous guidance for Q1, JetBlue was expecting -11 to -16 percent lower revenues compared to Q1 2019. This will be between -6 to -9 percent. Southwest is seeing leisure bookings that are stronger than in 2019, resulting in operating revenues of -8 to -10 percent in Q1 compared to -10 to -15 percent in its earlier forecast.

American’s Doug Parker, who will retire from the airline in sixteen days, said revenues even more than offset the increased fuel expenses. Ticket sales recently exceeded all previous records for a single day, Parker said. Delta is expecting a solid pre-tax profit in March based on revenues that outperform fuel costs. United also sees a lot of demand for leisure flying, with business travel coming back as well. Laderman remarked that although ticket prices will go up, right now, they are actually below 2019 levels. 

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Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.

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