Airfare hasn't been this expensive since May 2022. Domestic round-trip airfares averaged $623 in April, the highest in nearly four years, according to data from the Airlines Reporting Corporation, which tracks travel agency ticket sales. Gasoline has climbed above $4 a gallon, and AAA warned this week that prices could go even higher before summer ends.
According to reporting by CNBC, jet fuel prices doubled in less than three months after the United States and Israel attacked Iran, setting off a conflict that has left a key shipping channel effectively closed. Jet fuel is the second-biggest expense for airlines after labor, and carriers say they are increasingly passing those costs on to customers.
Airlines are also cutting back on growth plans because of higher fuel costs. Fewer flights on certain routes means fewer seats available to customers, and with demand still relatively strong, that is likely to push prices higher. The reduction in capacity compounds the pressure already coming from rising fuel expenses.
Spirit Airlines, the most recognizable budget carrier in the United States, shut down earlier this month. The airline partially blamed jet fuel prices for its failure to emerge from what amounted to back-to-back bankruptcies. CNBC described it as the biggest U.S. airline collapse in decades. Other airlines moved quickly to pick up Spirit's former customers, but Spirit's collapse removes one of the main sources of low-fare competition in the market.
Road trips will not offer much relief either. AAA forecast 39.1 million people will drive at least 50 miles between Thursday and Monday of Memorial Day weekend, up just 0.1% compared with last Memorial Day. That was the least growth in a decade, AAA told CNBC.
Gas price tracking site GasBuddy forecast that prices across the U.S. will average $4.48 on Memorial Day, up from $3.14 last year. GasBuddy also projected that prices could average $4.80 through Labor Day "if the Strait of Hormuz remains closed for a significant portion of the summer."
Despite the costs, travel intentions have not collapsed. Leisure travel intentions in the U.S. were slightly lower in March, at 82.8%, compared with 83.1% the same month a year earlier, but still relatively high, according to a note from UBS. "We believe the year-over-year moderation in travel intentions this year was likely due to higher jet fuel and other geopolitical concerns," UBS airline analyst Atul Maheswari wrote.
The Transportation Security Administration said it expects to screen 18.3 million people between Thursday and next Wednesday, compared with 18.5 million over a similar stretch last year. Memorial Day weekend will serve as an early indicator of how much consumers are willing to spend on travel as higher costs have extended across groceries, clothing, and other everyday expenses this year.
