Consumers can expect a bumpy air travel season this summer, and no, it isn’t about a super El Niño taking shape. The turbulence starts on the ground — as soon as the refueling trucks pull up.
U.S. airlines spent an additional $1.8 billion, or 56% more on fuel in March than they did in February, according to the . Some of that reflects higher seasonal demand, but it is mostly about higher fuel prices.
With both Iran and the U.S. blockading the Strait of Hormuz, the passageway where a fifth of global oil exports flow remains plugged up.
Denver-based Frontier Airlines, in its latest earnings report, told investors that its fuel costs in the first quarter averaged $2.88 a gallon. They are expected to average closer to $4.25 a gallon in the second quarter, assuming the conflict doesn’t heat up again.
The nearly 50% surge could push the share of fuel costs to total operating expenses from just under a quarter to nearly a third, wiping out any expected profit margin.
“In response to the fuel spike, we have taken decisive action to adjust capacity, fares, and ancillaries,” CEO Jim Dempsey told investors on a call Tuesday. Dempsey predicts that the airline will be able to claw back only 35% to 45% of its extra fuel spending via higher airfares and cost-cutting.
Unlike traditional airlines that have the cushion of higher-margin business class seats or that can trim extras like meals, ultra-low-cost carriers like Frontier already run lean. Their selling proposition is affordability, and it is being challenged.
“You can’t significantly increase the fare of customers who chose you specifically because you were the cheapest option,” said Arif Gasilov, an energy regulatory analyst with the Gasilov Group in New York.
Frontier, Avelo Airlines and other low-cost carriers have asked the , which U.S. Transportation Secretary Sean Duffy has rejected so far.
Frontier expands routes, will cut less profitable ones
Dempsey took over from longtime Frontier CEO Barry Biffle in December and has unwound some of his more aggressive expansion plans. The timing is coincidental, but also fortuitous.
So too has been the May 2 shutdown of Spirit Airlines, formerly the chief low-cost rival of Frontier. Spirit executives said their restructuring plan failed because of an unanticipated $100 million spike in fuel costs in March and April.
Dempsey said Frontier saw a “significant revenue intake” over last weekend as travelers scrambled to rebook. The two carriers had more than 100 routes in common, representing about a third of Frontier’s total capacity.
Frontier has targeted former Spirit customers, offering them a SAVENOW promo code for half off on base fares through May 15. That code can also be used by regular customers.
Going forward, Frontier said it would add nine more routes and 15 additional departures across 18 key Spirit markets like Orlando, Las Vegas and Detroit.
The near-term surge aside, Dempsey’s longer-term game plan involves cutting less profitable long-haul routes, such as those out of New York’s JFK, and focusing on shorter and more profitable regional routes.
As spring break flyers heading to Florida found out, the airline’s options out of Denver were thinner than a watered-down poolside piña colada.
Frontier is also returning two dozen A320neo planes it was leasing ahead of schedule, and it is pushing back the timeline for accepting 69 Airbus deliveries until 2031 and beyond.
Higher costs passed on to consumers
Everything is connected in today’s world. Increased fuel costs impact maintenance and other vendor costs. Those are passed on along with higher jet fuel costs to consumers, said Kshitiz Saini, a commodity manager with a major U.S. carrier.
“To offset this, carriers often adjust pricing on unbooked inventory to recover some of the unexpected losses or introduce additional fees, such as for checked baggage,” he said.
Like Gasilov, Saini, an aviation supply chain expert, said ultra-low cost carriers are especially vulnerable to fuel spikes in part because they rotate their aircraft more heavily, leaving them more susceptible to any disruptions.
“Any delay or operational issue can quickly increase costs, which, when combined with rising fuel prices, puts additional strain on their business model,” he said.
The inflation Frontier has faced to fill up its tanks is a little bit less than what consumers are facing. The statewide price for a gallon of unleaded gasoline in Colorado has shot up from $2.78 a gallon in late February to $4.41 a gallon on May 5, a 58% increase, according to AAA.
But there’s a big difference. An A320neo needs about 6,300 gallons of fuel to get full, while a Ford F-150 takes about 23 to 36 gallons.
United, Southwest were having a good year before conflict started
Frontier is the third-largest airline operating out of Denver International Airport, responsible for nearly 10% of the passengers carried. United Airlines is the largest, with about half of the traffic, while Southwest Airlines has about 30%.
“We have demonstrated quarter after quarter that we are built to withstand disruptions, and this moment is no different,” said United CEO Scott Kirby in an April 22 earnings release. “We’ll stay nimble in the short term while continuing to grow the airline and invest in our customers, product and people.”
United Airlines had its best first quarter demand-wise in its history and was coming off a strong 2025, where it and Delta Airlines accounted for all of the domestic airline industry’s profitability.
Like at a lot of airlines, things were looking up this year. And then they weren’t.
In a March 20 letter, Kirby tried to reassure employees that while the blow of higher fuel prices was severe, customer demand was holding up.
“The reality is, jet fuel prices have more than doubled in the last three weeks. If prices stayed at this level, it would mean an extra $11 billion in annual expense just for jet fuel,” he wrote.
As a point of comparison, he noted that United’s most profitable year generated under $5 billion in net income.
United had built up three times the cash balance it had heading into the COVID shutdown, and it ended 2025 with the highest credit rating it had seen in three decades.
“That means that higher oil puts a lot more stress on United’s competitors and that stress happens faster. We have the time and the luxury to ride this out and stay focused on the long term,” Kirby said.
Like Frontier and United, Southwest Airlines executives described a year that was going well before the conflict started.
“But for fuel, everything is on track. The only change is fuel, which is a significant headwind,” said Southwest Airlines CEO Robert Jordan during an April 23 earnings call.
Southwest had expected jet fuel prices to average $2.40 a gallon in the first quarter, but saw them rise to $2.73 a gallon in anticipation of the conflict. The Dallas-based carrier expects its fuel prices to average around $4.10 to $4.15 per gallon in the second quarter.
Will customers stay home because of fuel costs?
Jordan and Dempsey have both pulled back guidance for the rest of the year, given the added uncertainty around fuel costs. Another big unknown is how consumers will respond as inflationary pressures squeeze their spending.
Mark Zandi, chief economist with Moody’s Analytics, estimates that higher gasoline prices have drained $23 billion directly from household budgets since the war started. And those costs will seep into everything from the price of groceries to what Amazon needs to charge to deliver its packages. And yes, into airfares.
A sustained 50-cent increase per gallon in jet fuel prices can wipe out the quarterly profit of a 100-plane fleet, and add $20,000 to the cost of a cross-country flight, said Eliot Vancil, CEO at Fuel Logic, a Dallas firm that helps airlines with fuel deliveries and logistics.
“The fuel surcharge usually appears within one month of a fuel spike and the price per ticket usually ranges from $15 to $40,” Vancil said. Another strategy is to raise the cost of baggage fees. Vancil thinks those could go up around $10.
Unlike Europe and Asia, which rely heavily on oil coming out of the Middle East, the U.S. is more insulated. Prices are higher, but shortages aren’t forecast, although supply could get tighter in California, Oregon and Washington than in other states.
Goldman Sachs, , estimates that commercial jet fuel inventories in Europe could dip below a critical 23-day threshold next month. That will trigger more intense rationing, such as flight cancellations beyond the 20,000 already announced through October, and retroactive surcharges on already purchased tickets.
Asia could cross the same threshold later in the summer, given its smaller refinery capacity and even heavier reliance on Gulf petroleum.
Why 23 days? Goldman Sachs notes it is because of a technical issue at play that limits the supply left after a required buffer to six to 10 days of usable fuel within tanks.
Most fuel storage tanks have floating roofs, which puts them in danger of collapse or an explosion if levels drop below 20% of capacity. Put another way, the needle on the fuel gauge can’t run too low without damaging the tank. That essentially locks up 20% of the supply.
Before things get to that point, regulators in Europe and elsewhere may shut down airports and force additional flight cancellations. That could upend the plans of many who have already booked their trips.
S&P Global Energy expects that if Hormuz were to be reopened, another seven months, likely more, would be needed to restore upstream production, assuming no permanent damage and supply chains operate smoothly.
Higher fuel costs and higher air fares may linger long after the Iran conflict cools down.
